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MRF flows suggest improving sentiment

Both Hong Kong and China domiciled funds sold in the cross-border scheme collected assets in April, SAFE data shows.

After struggling in March, funds in the MRF scheme gained some momentum in April. Both south and northbound funds reported positive inflows.

For the month of April, northbound (Hong Kong domiciled) funds sold in China had inflows of RMB 2.28bn ($320m).

Southbound funds (domiciled in China and sold in Hong Kong) saw inflows of RMB 2.88m, ($404,000), according to the latest data from the State Administration of Foreign Exchange (Safe).

Both totals show significant improvement from the previous month numbers, suggesting that investor sentiment is beginning to recover from the coronavirus-induced caution.

However, northbound fund flows have typically been in the billions of RMB while southbound flows are in the millions.

The MRF between mainland China and Hong Kong is a scheme jointly launched by the China Securities Regulatory Commission (CSRC) and the Hong Kong Securities and Futures Commission (SFC) in July 2015. Under the scheme, eligible mainland and Hong Kong funds can be distributed in each other’s markets.

Since the MRF began in 2015, 23 northbound products from 12 firms have been approved by China’s regulator, according to CSRC records.

In February this year, the CSRC approved six funds under the MRF scheme, which include the Amundi Disruptive Opportunities Equity Classic Fund, the JP Morgan Asia Growth Fund, the Pictet Strategic Income Fund and three products from HSBC Global Asset Management.

As of 22 May, there are seven pending MRF applications. Two are from China Asset Management, two are from Fidelity, one is from Taikang Asset Management Hong Kong, one is from E Fund Management (Hong Kong), and the other one is from Income Partners, according to CSRC records.

Looking at southbound funds, the Securities and Futures Commission has approved around 50 China-domiciled funds to be sold in Hong Kong, but only two dozen funds have been made available to investors, FSA previously reported.

Northbound fund flows

Monthly net flows in RMB Total net inflows in RMB* since the scheme started
Jan-19 (884m) 8.14bn
Feb-19 75.5m 8.22bn
Mar-19 1.34bn 9.55bn
Apr-19 976.3m 10.53bn
May-19 969.7m 11.50bn
Jun-19 1.45bn 12.95bn
Jul-19 2.45bn 15.39bn
Aug-19 466m 15.86bn
Sep-19 803m 16.66bn
Oct-19 (111.7m) 16.55bn
Nov-19 87.4m 16.64bn
Dec-19 (455.1m) 16.18bn
Jan-20 (407.1m) 15.78bn
Feb-20 1.03bn 16.8bn
Mar-20 (1.53bn) 15.3bn
Apr-20 2.28bn 17.6bn
Source: Safe. *Figure at the end of the month

Southbound fund flows

Monthly net flows in RMB Total net inflows in RMB* since the scheme started
Jan-19 (3.47m) 429.16m
Feb-19 6.01m 435.18m
Mar-19 12.14m 447.32m
Apr-19 (79.01m) 368.32m
May-19 (39.70m) 328.62m
Jun-19 (28.66m) 299.96m
Jul-19 2.06m 302.01m
Aug-19 (20.52m) 281.50m
Sep-19 (10.57m) 270.93m
Oct-19 (4.63m) 266.29m
Nov-19 (2.09m) 264.20m
Dec-19 970,000 265.17m
Jan-20 63.69m 328.86m
Feb-20 (21.18m) 307.68m
Mar-20 16.51m 324.19m
Apr-20 2.88m 327.07m
Source: Safe. *Figure at the end of the month

Part of the Mark Allen Group.