Posted inChina

MRF funds suffer two-way outflows in October

Mainland investors have been avoiding northbound funds in favour of domestic products.

Hong Kong-domiciled funds sold in the mainland via the Hong Kong-China Mutual Recognition of Funds (MRF) scheme continued to see net outflows in October, bringing year-to-date redemptions to RMB 2.09bn ($320m), according to the latest data from China’s State Administration of Foreign Exchange (SAFE).

This was the sixth consecutive month that the funds saw net outflows since May, as investors in the mainland have favoured China’s domestic financial markets.

Northbound funds

Monthly net flows in RMBTotal net inflows in RMB* since the scheme started
YTD net flows: (RMB 2.09bn)
2019 total net inflows: RMB 7.16bn
Source: SAFE

“One of the reasons there have been outflows from northbound funds since May could be due to Chinese investors pulling their money out from offshore funds to invest in onshore funds due to the stronger performance of the Chinese stock market,” Kean Yung Siau, Singapore-based analyst at Cerulli Associates, told FSA previously.

“This is evidenced by the huge assets raised by onshore mutual fund IPOs, which exceeded RMB 2trn as of the end of September.”

Equity-related funds, including active equity funds, equity-oriented balanced funds and equity index funds account for close to 50% of the assets raised, he added.

In total, there are around 23 northbound funds managed by 12 managers, according to data from the CSRC.

Six of them were approved this year, 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 funds managed by Gao Teng  Global Asset Management, China Asset Management, Fidelity, E Fund ManagementIncome Partners and BOCHK Asset Management, CSRC records show.


Like northbound funds, southbound products (mainland-domiciled products sold in Hong Kong), had net outflows of RMB 13.79m in October.

Siau noted that the outflows during the month was small.

“It could be due to the normal course of buying and selling from investors,” he said.

“Another reason is that the combined qualified foreign institutional investor (QFII) and RQFII regime came into effect in November, which expanded the investment scope of the new scheme, might have prompted some institutional investors to free up their investments in southbound funds, and invest directly through the new scheme,” he added.

Year-to-date flows remain positive at around RMB 154.6m, according to SAFE data.

Southbound funds

Monthly net flows in RMBTotal net inflows in RMB* since the scheme started
YTD net flows: RMB 154.6m
2019 total net inflows: RMB 7.16bn
Source: SAFE

In total, there are around 50 southbound funds that were approved to be sold in Hong Kong, according to data from SFC.

Part of Mark Allen.