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Northbound MRF outflow continues in Q1

Funds sold under the China-Hong Kong Mutual Recognition of Funds (MRF) continued to see net outflows in March after an all-time high outflow in the previous month, according to data from the State Administration of Foreign Exchange (SAFE).
Northbound MRF outflow continues in Q1
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The scheme, launched in 2016, allows cross-border trading of registered funds between the mainland and the SAR.

The monthly net outflow for northbound funds (Hong Kong-domiciled funds available for sale to domestic mainland investors) was RMB 97.12m ($15.27m). While the funds still lost assets, the March number was much lower than the historic high outflow of RMB 522.72m in February, data from SAFE shows.

Sales began declining after the funds collectively gathered RMB 2.08bn of new assets within the single month of September last year. Since December, they saw only collective net outflows.

On a quarterly basis, the declines in fund sales, together with redemptions add up to net outflows of RMB 736.02m from January to March, compared to net outflow of RMB 477.82m over the same period in 2017.

Moreover, one of the northbound funds under the scheme, JP Morgan Asian Total Return Bond Fund was the top asset-losing funds among other Hong Kong-domiciled active mutual funds in the first quarter of the year, FSA reported earlier.

MRF monthly net sales (RMB)

Northbound Southbound
 January -116.2m 62.1m
 February -522.7m 32.4m
March -97.1m -28.6m
Average net sales in 2017 390.7m 20m
Total net sales since January 2016  11.7bn  402m
Source: SAFE

Despite poor sales performance during the recent months, asset managers continue to file the applications to put their Hong Kong-domiciled funds on sale on the mainland.

Last month, Haitong International Asset Management, the subsidiary of the Hong Kong-listed Haitong International Securities, announced it is seeking approval to distribute its Korea equity fund onshore.

Currently, there are 10 pending applications for northbound distribution of funds under the MRF scheme, including the latest application filed by Haitong. Some were filed as early as July 2015, according to CSRC’s records on 13 April.

The list of MRF-approved northbound funds

Zeal Voyage China Fund

JPMorgan Asian Total Return Bond fund

Hang Seng China H-Share Index Fund

JPMorgan Pacific Securities Fund

BOCHK All Weather China High Yield Bond Fund

Schroders Asian Asset Income Fund

Amundi HK New Generation Asia Pacific Equity Dividend Fund

BOCI-Prudential BOCHK Global Equity Fund

BEA Union Investment Asian Bond and Currency Fund

BEA Union Investment Asia Pacific Multi Income Fund

Source: FSA

Part of the Mark Allen Group.