Posted inNewsHong KongChinaFund Flows

MRF funds saw two-way outflows

For the first time since March this year, investors in Hong Kong pulled money out of southbound funds.

In August, southbound funds distributed via the Hong Kong-China Mutual Recognition of Funds (MRF) scheme lost RMB 1.75m ($257,800), followed by five consecutive months of fund inflows, according to China’s State Administration of Foreign Exchange (Safe).

It was the first time since March, that investors in Hong Kong withdrew cash out of southbound funds (mainland-domiciled products sold in Hong Kong).

The MRF between mainland China and Hong Kong is a scheme jointly launched by the China Securities Regulatory Commission (CSRC) and Hong Kong’s 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.

In total, Hong Kong’s SEC has approved around 50 China-domiciled funds to be sold in Hong Kong via the MRF, but only two dozen funds have been made available to investors, SFC records show.

Moreover, southbound funds have gained little traction compared with northbound products. Since the MRF scheme began, southbound products have only garnered RMB 397.4m, while investors have poured RMB 15.34bn in northbound funds.

Southbound fund flows

Monthly net flows in RMB Total net inflows in RMB* since the scheme started
Jan-20 63.69m 328.86m
Feb-20 (21.18m) 307.68m
Mar-20 16.51m 324.19m
Apr-20 2.88m 327.07m
May-20 530,000 327.60m
Jun-20 2.76m 330.4m
Jul-20 68.8m 399.2m
Aug-20 (-1.75m) 397.4m
YTD net flows: RMB 132m
2019 total net outflows: RMB 168.43m
Source: Safe. *Figure at the end of the month

Northbound funds

Meanwhile, northbound (Hong Kong-domiciled funds)  saw net outflows of RMB 418.3m in August, according to the latest data from Safe.

This is the fourth consecutive month that northbound funds have had net redemptions, with outflows of RMB 258.8m, RMB 367.01m and RMB 1.17bn in May, June and July respectively.

However, the typical trend is that northbound funds have attract net inflows, while southbound products generally have had net outflows.

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

This year, CSRC approved six funds under the MRF scheme, which include products managed by Amundi, JP Morgan Asset Management, Pictet Asset Management and HSBC Global Asset Management.

Seven more funds are still awaiting regulatory approval, which include products managed by Gao Teng  Global Asset Management, China Asset Management, Fidelity, E Fund ManagementIncome Partners and BOCHK Asset Management, according to the CSRC.

Northbound fund flows

Monthly net flows in RMB Total net inflows in RMB* since the scheme started
Jan-20 (407.1m) 15.78bn
Feb-20 1.03bn 16.8bn
Mar-20 (1.53bn) 15.3bn
Apr-20 2.28bn 17.6bn
May-20 (258.8m) 17.3bn
Jun-20 (367.01m) 16.9bn
Jul-20 (1.17bn) 15.76bn
Aug-20 (418.3m) 15.34bn
YTD net flows: (RMB 837.9m)
2019 total net inflows: RMB 7.16bn
Source: Safe. *Figure at the end of the month

Part of the Mark Allen Group.