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 840.7m ($128.5m) in February this year, according to the latest data from China’s State Administration of Foreign Exchange (SAFE).
The inflows further indicate 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.
In total, northbound funds have attracted RMB 2.6bn this year, following the sizable inflows of RMB 2.14bn in January, SAFE data shows.
“Northbound funds gained inflows in February as Hong Kong stocks were bullish in January, and valuations were relatively more attractive than mainland onshore equities,” Ye Kangting, senior analyst at Cerulli Associates, told FSA.
“Trump’s ban on American investments in Chinese firms have led to some US capital fleeing away from Hong Kong, creating low-priced good market timing for H-share purchase,” she added.
Northbound funds monthly flows (in RMB)
| Inflows / (outflows) | |
| Jan-20 | (407.1m) |
| Feb-20 | 1.03bn |
| Mar-20 | (1.53bn) |
| Apr-20 | 2.28bn |
| 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-20 | 409.13m |
| Jan-21 | 2.14bn |
| Feb-21 | 840.7m |
| 2020 total net outflows | (1.77bn) |
SOUTHBOUND FUNDS
Meanwhile, mainland-domiciled funds sold in Hong Kong (southbound funds) had net inflows of RMB 94.2m in February, which was the second largest recorded monthly inflows since the MRF programme started.
The largest monthly inflow recorded was RMB 235.7m in January this year.
“For southbound funds, some could see the A-share market dip as good purchase points in February,” Ye said, adding that the long-term prospects in A-shares will continue to remain attractive for foreign investors.
Since the scheme began, southbound funds have had total net inflows of RMB 640.3m, compared with the net inflows of northbound funds which are RMB 17.4bn, according to SAFE.
Southbound funds monthly flows (in RMB)
| Inflows / (outflows) | |
| Jan-20 | 63.69m |
| Feb-20 | (21.18m) |
| Mar-20 | 16.51m |
| Apr-20 | 2.88m |
| May-20 | 530000 |
| Jun-20 | 2.76m |
| Jul-20 | 68.8m |
| Aug-20 | (1.75m) |
| Sep-20 | 36.16m |
| Oct-20 | (13.79m) |
| Nov-20 | (89.77m) |
| Dec-20 | (19.63m) |
| Jan-21 | 235.7m |
| Feb-21 | 94.2m |
| 2020 total net inflows | 45.22m |
