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Northbound funds saw more outflows in July

On the flipside, southbound funds have attracted net inflows since March this year.

Northbound (Hong Kong-domiciled funds) distributed via the Hong Kong-China Mutual Recognition of Funds (MRF) scheme suffered net outflows of RMB 1.17bn ($171m) in July, according to the latest data from China’s State Administration of Foreign Exchange (Safe).

This is the third consecutive month that northbound funds have had net redemptions, with outflows of RMB 258.8m and RMB 367.01m in May and June respectively.

However, the typical trend is that northbound funds have attract net inflows, while southbound products generally have had net outflows.

The MRF between mainland China and Hong Kong is a scheme jointly launched by the China Securities Regulatory Commission (CSRC) and Hong Kong’s Securities and Futures Commission (SFC) in July 2015. Under the scheme, eligible mainland and Hong Kong funds can be distributed in each other’s markets.

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

This year, CSRC approved six funds under the MRF scheme, 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 products managed by Gao Teng  Global Asset Management, China Asset Management, Fidelity, E Fund Management, Income Partners and BOCHK Asset Management, according to the CSRC.

Northbound fund flows

Monthly net flows in RMB Total net inflows in RMB* since the scheme started
Jan-20 (407.1m) 15.78bn
Feb-20 1.03bn 16.8bn
Mar-20 (1.53bn) 15.3bn
Apr-20 2.28bn 17.6bn
May-20 (258.8m) 17.3bn
Jun-20 (367.01m) 16.9bn
Jul-20 (1.17bn) 15.76bn
YTD net flows: (RMB 419.61m)
2019 total net inflows: RMB 7.16bn
Source: Safe. *Figure at the end of the month

Southbound funds

Meanwhile, investors in Hong Kong have been pouring money into southbound funds (mainland-domiciled products sold in Hong Kong) since March this year.

In July, southbound funds collected RMB 68.8m, which is the largest monthly net inflow figure this year, according to Safe.

In total, Hong Kong’s SEC has approved around 50 China-domiciled funds to be sold in Hong Kong via the MRF, but only two dozen funds have been made available to investors, SFC records show.

Moreover, southbound funds have gained little traction compared with northbound products. Since the MRF scheme began, southbound products have only garnered RMB 399.2m, while investors have poured RMB 15.76bn in northbound funds.

Southbound fund flows

Monthly net flows in RMB Total net inflows in RMB* since the scheme started
Jan-20 63.69m 328.86m
Feb-20 (21.18m) 307.68m
Mar-20 16.51m 324.19m
Apr-20 2.88m 327.07m
May-20 530,000 327.60m
Jun-20 2.76m 330.4m
Jul-20 68.8m 399.2m
YTD net flows: RMB 134m
2019 total net outflows: RMB 168.43m
Source: Safe. *Figure at the end of the month

Part of the Mark Allen Group.