MRF sales positive for China funds

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Net sales of China-domiciled funds sold in Hong Kong via the Mutual Recognition of Funds (MRF) scheme turned positive in November, according to China’s State Administration of Foreign Exchange (SAFE).

Southbound funds (China-domiciled funds sold in Hong Kong) saw net inflows of around RMB1.7m ($250,000) in November, reversing the trend of net outflows for four consecutive months.

At that time, year-to-date inflows were also positive, at RMB134.43m, despite the negative market performance in onshore China equities.

Onshore China equities were one of the worst-performing asset classes within emerging markets in 2018. The CSI 300 Index returned -27.57% in US dollar terms, versus the MSCI Emerging Markets’ -14.22%, according to FE Analytics.

Yet investors outside Asia are still positive about Chinese equities, René Buehlmann, UBS Asset Management’s Asia-Pacific head, said last month.

“Despite the fact we have very poor equity performance, when we look at where the growth is coming from, and quite frankly [will come from] in the future, it will be from emerging markets.”

As of December, China equity funds saw net inflows of €4.69bn ($5.33bn), according to Morningstar Direct. In other Asian markets, such as in Malaysia and Thailand, investors have poured money into such products. For example, China equity funds in Thailand saw net inflows of THB16.89bn ($520m), while Malaysia-based investors allocated $1.88bn into Greater China funds.

Northbound products

On the flipside, northbound products under the MRF scheme saw net outflows of RMB173m in November. This followed net inflows the previous month.

Year-to-date ending November, net outflows amounted to RMB3.32bn, according to SAFE.

Nonetheless, foreign players have continued to register new products. There were at least eight applications in 2018 to sell funds in the mainland, with Amundi being the most recent, according to the China Securities Regulatory Commission (CSRC).

Most recently, Value Partners’ Classic Fund was the latest fund to be approved for sale in the mainland via the MRF scheme.

In total, net sales of MRF funds sold in China are at RMB9.1bn since the programme began in 2015, which compares with RMB470m for MRF funds sold in Hong Kong, according to SAFE.

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