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Northbound funds March outflows: $217m

The global market plunge in the first quarter prompted investors to reduce global exposure and put money into China via the Mutual Recognition of Funds (MRF) scheme, data shows.

Northbound (Hong Kong domiciled) funds distributed through the MRF had large outflows of RMB 1.53bn ($216.7m) in March and lost RMB 906.6m in the first quarter.

In contrast, southbound funds (mainland-domiciled funds sold in Hong Kong) saw inflows of RMB 16.5m ($2.34m) during volatile March and collected RMB 59m in the first quarter of this year, according to the latest data from the State Administration of Foreign Exchange (Safe).

The March fund flow numbers are the reverse of the performance in February, when northbound funds reported inflows of RMB 1.03bn while southbound funds lost RMB 21.18m.

In fact the first-quarter performance is also contrary to typical flow patterns. During the same quarter in 2019, northbound fund flows (RMB 528m) dwarfed southbound flows (RMB 14.7m), as investors opted for the more global exposure provided by the Hong Kong domiciled instruments.

The same pattern played out during full year 2019, when net sales for northbound funds reached RMB 7.16bn while southbound funds had net outflows of RMB 168.4m.

CSRC approval

Since the MRF began in 2015, 23 northbound products from 12 firms have been approved by China’s regulator, according to CSRC records.

In February this year, the CSRC approved six funds under the MRF scheme, which includes the Amundi Disruptive Opportunities Equity Classic Fund, the JP Morgan Asia Growth Fund, the Pictet Strategic Income Fund and three products from HSBC Global Asset Management.

Last year, the CSRC approved only five Hong Kong-domiciled products for mainland distribution.

Looking at southbound funds, the Securities and Futures Commission has approved around 50 China-domiciled funds to be sold in Hong Kong, but only two dozen funds have been made available to investors, FSA previously reported.


Northbound fund flows

Monthly net flows in RMB Total net inflows in RMB* since the scheme started
Jan-19 (884m) 8.14bn
Feb-19 75.5m 8.22bn
Mar-19 1.34bn 9.55bn
Apr-19 976.3m 10.53bn
May-19 969.7m 11.50bn
Jun-19 1.45bn 12.95bn
Jul-19 2.45bn 15.39bn
Aug-19 466m 15.86bn
Sep-19 803m 16.66bn
Oct-19 (111.7m) 16.55bn
Nov-19 87.4m 16.64bn
Dec-19 (455.1m) 16.18bn
Jan-20 (407.1m) 15.78bn
Feb-20 1.03bn 16.8bn
Mar-20 (1.53bn) 15.3bn
Source: Safe. *Figure at the end of the month

Southbound fund flows

Monthly net flows in RMB Total net inflows in RMB* since the scheme started
Jan-19 (3.47m) 429.16m
Feb-19 6.01m 435.18m
Mar-19 12.14m 447.32m
Apr-19 (79.01m) 368.32m
May-19 (39.70m) 328.62m
Jun-19 (28.66m) 299.96m
Jul-19 2.06m 302.01m
Aug-19 (20.52m) 281.50m
Sep-19 (10.57m) 270.93m
Oct-19 (4.63m) 266.29m
Nov-19 (2.09m) 264.20m
Dec-19 970,000 265.17m
Jan-20 63.69m 328.86m
Feb-20 (21.18m) 307.68m
Mar-20 16.51m 324.19m
Source: Safe. *Figure at the end of the month

Part of the Bonhill Group.