Net sales for northbound funds sold under the Hong Kong-mainland Mutual Recognition of Funds (MRF) scheme reached a record high of RMB 16.66bn ($2.37bn) as of the end of September, the highest since the programme started in 2015, according to latest records from the State Administration of Foreign Exchange (Safe).
The latest net flows figure of RMB 803m beats the previous record of RMB 466m in August.
Northbound funds had positive flows for eight consecutive months this year, with year-to-date net inflows of RMB 7.64bn.
It represents a huge turnaround from when investors redeemed a total of RMB 4.73bn between December 2017 and January 2019.
Yoon Ng, director for Asia-Pacific insights at Broadridge Financial, said earlier that there has been an increase in outbound investments from Chinese investors due to rising concerns about the US-China trade war and the slowing domestic economy.
However, on the other side, investors in Hong Kong are facing headwinds. Deteriorating geopolitical and economic trends as well as volatile markets have engendered a pessimistic outlook among most industry practitioners, according to a recent report from the Private Wealth Management Association of Hong Kong and KPMG.
The report forecast 5%-10% annualised assets under management growth over the next five years, down from 10%-20% in last year’s survey.
Meanwhile, the number of high-net-worth individuals (people with more than $1m in investable assets) in Hong Kong dropped 10% from the previous year and the number of billionaires fell 6%, FSA previously reported.
Northbound fund flows
| Monthly figure in RMB | Total assets in RMB (as of the end of the month) | |
| December 2017 – January 2019 (14 consecutive months of net outflows) | (4.73bn) | |
| February 2019 | 75.5m | 8.22bn |
| March 2019 | 1.34bn | 9.55bn |
| April 2019 | 976.3m | 10.53bn |
| May 2019 | 969.7m | 11.50bn |
| June 2019 | 1.45bn | 12.95bn |
| July 2019 | 2.45bn | 15.39bn |
| August 2019 | 466m | 15.86bn |
| September 2019 | 803m | 16.66bn |
| YTD total net inflows | 7.64bn | |
| Net inflows since the programme started | 16.62bn |
Source: Safe
In total, there are 14 northbound funds under the MRF scheme and 13 more products that are still waiting to be approved, with Pictet Asset Management being the latest to lodge an MRF application with the Chinese securities regulator.
Southbound funds
On the other hand, southbound funds – mainland-domiciled funds sold in Hong Kong, had net outflows of RMB 10m in September, with a drop of RMB 10m compared with the previous month’s performance. This year, redemptions totalled RMB 161.7m.
Southbound fund flows
| Monthly figure in RMB | Total assets in RMB (as of the end of the month) | |
| 2017 total inflows | 239.83m | |
| 2018 total inflows | 96.55m | |
| January 2019 | (3.47m) | 429.16m |
| February 2019 | 6.01m | 435.18m |
| March 2019 | 12.14m | 447.32m |
| April 2019 | (79m) | 368.32m |
| May 2019 | (39m) | 328.62m |
| June 2019 | (28m) | 299.96m |
| July 2019 | 2m | 302.01m |
| August 2019 | (20m) | 281.50m |
| September 2019 | (10m) | 270.93m |
| YTD outflows | 161.7m |
Source: Safe
Since the MRF scheme started in 2015, the demand for southbound products has been weak, with total net inflows of RMB 249.4m, which is small compared to the much stronger northbound inflows of RMB 16.62bn.
Broadridge’s Ng also said that southbound sales will likely remain muted as Hong Kong investors already have other existing options to have a China play without going through the MRF route.
The Securities and Futures Commission has approved around 50-domiciled funds to be sold in Hong Kong. However, only two dozen funds have been made available for sale to investors.
