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HSBC Global gets northbound MRF approval

Year-to-date, only six Hong Kong-domiciled funds have been approved for sale in the mainland, according to records from the China Securities Regulatory Commission (CSRC).

The Hong Kong-China Mutual Recognition of Funds (MRF) scheme allows Hong Kong-domiciled funds to be sold in China and vice-versa.

HSBC Global Asset Management was the latest to receive approval  from the CSRC to launch its Asia-Pacific ex Japan Volatility Focused Fund in the mainland through the MRF programme.

The fund is the firm’s first product to be sold in China (northbound funds) through the scheme. The firm waited at least two years for MRF approval since filing an application in July 2016.

HSBC GAM’s Chinese joint venture firm, HSBC Jintrust Fund Management, also sells its mainland-domiciled funds in Hong Kong (southbound funds) via the MRF scheme. It has three southbound funds approved by Hong Kong’s Securities and Futures Commission to be sold in the SAR.

So far, only six northbound funds, including those managed by BEA Union Investment, Bank of China Hong Kong and Hang Seng Investment Management, were approved for sale in China. The firms waited nearly three years to receive the greenlight from the regulator, the records show.

Northbound outflows

The launch of the HSBC product in China comes at a time when northbound funds have seen nine consecutive months of net outflows, according to the latest records from China’s State Administration of Foreign Exchange (SAFE).

Year-to-date ending in September, total net outflows from northbound funds amounted to RMB 3.4bn ($490m).

Since the programme started in 2015, northbound funds have had inflows of RMB 9bn.

On the flipside, southbound funds had net inflows of RMB 142.7m this year, according to SAFE records. However, southbound funds have not gained as much assets as their northbound peers, with net inflows of just RMB 478.9m since the end of 2015.

More firms still waiting

In total, 10 Hong Kong-domiciled funds are sold in China through the MRF programme. Eleven other funds are still waiting for approval from the regulator, with fresh applications this year coming from JP Morgan Asset Management, Haitong International Asset Management, Taikang Asset Management, Value Partners and Bosera Asset Management, according to CSRC records.

By comparison, nearly 50 mainland-domiciled funds have been approved for sale in Hong Kong via the MRF by the Securities and Futures Commission, according to records from the regulator. However, only half of them have begun the selling process.

It has been a year since a mainland-domiciled fund was approved for sale in Hong Kong. The latest was the Credit Theme Jijihong Bond Fund, which received approval from the SFC last year. It is managed by Beijing-based Yinhua Fund Management.

At the time, Wang Yong, a responsible officer at Yinhua International Capital Management, which is the Hong Kong-registered entity of the Chinese firm, said that the firm plans to submit more applications to sell funds under the MRF scheme.

Part of the Bonhill Group.