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Singapore and China eye mutual recognition of funds

In a recent agreement to strengthen links between the two countries, the Monetary Authority of Singapore (MAS) and the China Securities Regulatory Commission (CSRC) said they would explore an MRF scheme.

The two regulatory bodies said the future links between the two markets might include a programme similar to the Mutual Recognition of Funds (MRF), a mechanism facilitating cross-border sales of mutual funds between China and Hong Kong.

The announcement was made by MAS on 3 November, following the 2nd MAS-CSRC Supervisory Roundtable held in Singapore on 31 October.

Singapore has always been far behind Hong Kong in establishing financial industry links with mainland China. An MRF scheme, allowing cross-border fund sales, would potentially boost volume in the small Singapore market.

However, Stewart Aldcroft, Hong Kong-based chief executive officer at CitiTrust, said any plans for the programme would take a long time to implement.

Although he called the talks about the strengthening of the collaboration between China and Singapore “an interesting development in the region’s asset management industry”, he said that it might take a long while to see actual movements, given that China’s connections with Singapore are not as strong as its link with Hong Kong.

“It is still a very early stage,” he said. “It took two-and-a-half years from the announcement that Hong Kong intended to establish the MRF with China until the first product launch. Hong Kong is still struggling to obtain more approvals from mainland regulators,” he added.

Aldcroft also noted that the MRF took a long time despite the fact that Hong Kong is a part of China. While the development of the China-Hong Kong MRF would provide useful insights for designing similar programmes with other regions, persisting inefficiency issues among regulatory bodies in Asia would pose additional challenges, he said.

The two other fund passporting schemes that already exist in Asia, the Asia Regional Funds Passport (ARFP) and the Asean Collective  Investment Scheme (CIS) have been hampered by issues around taxation, fund registration and marketing.

Such inefficiencies have been driving away fund managers in other regions who might have an interest in participating in these schemes, Aldcroft noted.

Officials in China and Singapore also mentioned collaboration in the securities market by supporting the listing of qualifying Chinese companies in Singapore and by developing a staff exchange programme between the regulatory authorities of the two countries.

The participants in the supervisory roundtable also discussed the frameworks for supervising fund managers and regulatory developments in the derivatives markets, according to the announcement.

“As global capital markets become more interlinked, it is important for supervisory authorities to promote greater understanding of their respective regulatory frameworks,” said MAS’ deputy managing director Ong Chong Tee, in the statement.

Part of the Mark Allen Group.