Posted inChina

MRF funds see huge inflows in January

Data suggest a turnaround in sentiment towards northbound funds.
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Hong Kong-domiciled funds sold in the mainland (northbound funds) via the Hong Kong-China Mutual Recognition of Funds (MRF) scheme saw net inflows of RMB 2.14bn ($331m) in January, according to the latest data from China’s State Administration of Foreign Exchange (SAFE).

It was the largest net monthly inflow recorded since April last year, SAFE data shows. The data suggests a turnaround in sentiment from 2020, when northbound funds had seven consecutive months of outflows since May. In total, northbound products had net outflows of $1.77bn last year.

Launched in 2015, the scheme allows eligible mainland- and Hong Kong-domiciled funds to be distributed in each other’s markets.

Northbound funds monthly flows (in RMB)

Inflows / (outflows)
Jan-20(407.1m)
Feb-201.03bn
Mar-20(1.53bn)
Apr-202.28bn
May-20(258.8m)
Jun-20(367.01m)
Jul-20(1.17bn)
Aug-20(418.3m)
Sep-20(760.87m)
Oct-20(488.29m)
Nov-20(89.11m)
Dec-20409.13m
Jan-20212.14bn 
2020 total net outflows(1.77bn)
Source: SAFE

Since the scheme started in 2015, northbound funds had total net inflows of RMB 16.55bn, according to SAFE.

SOUTHBOUND FUNDS

Meanwhile, mainland-domiciled funds sold in Hong Kong (southbound funds) had net inflows of RMB 235.7m last month.

It was the largest recorded monthly inflow since the MRF programme started, representing almost half of the total net inflows of RMB 546.1m since 2015.

The largest monthly inflow previously recorded was RMB 89.1m in June 2018.

“Weakening US dollar as well as strong China market performance could be the reasons that drive inflows into southbound funds in January,” Kean Yung Siau, Singapore-based analyst at Cerulli Associates, told FSA.

“[However], we don’t expect to see continued huge inflows [to both northbound and southbound funds] as there was a global selloff in February, led by tech stocks amid rising US government bond yields.”

Southbound funds monthly flows (in RMB)

Inflows / (outflows)
Jan-2063.69m
Feb-20(21.18m)
Mar-2016.51m
Apr-202.88m
May-20530000
Jun-202.76m
Jul-2068.8m
Aug-20(1.75m)
Sep-2036.16m
Oct-20(13.79m)
Nov-20(89.77m)
Dec-20(19.63m)
Jan-21235.7m 
2020 total net inflows45.22m
Source: SAFE

Part of Mark Allen.