Hong Kong investment funds body seeks China rules relaxation in exchange for limiting sales to ‘Greater Bay Area’
- Greater Bay Area offers huge opportunity for Hong Kong’s fund industry, says EY
- Hong Kong Investment Fund Association wants Chinese regulator to shorten approval process for Mutual Recognition of Fund Scheme
The Hong Kong Investment Fund Association, which represents the Hong Kong businesses of international fund houses managing US$1.2 trillion in assets worldwide, will on Monday urge Beijing to ease restrictions on sale of cross-border funds after a scheme launched in 2015 failed to take off.
The industry body has worked with multinational professional services firm EY on a range of proposals to be submitted on Monday, the top priority being that the China Securities Regulatory Commission lift some restrictions in exchange for Hong Kong funds being sold only in the region covered by the “Greater Bay Area” initiative instead of the whole country. The association also wants the commission to shorten its approval process for the Mutual Recognition of Fund Scheme, the cross-border fund sales scheme launched in 2015, to six months from three years.
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“The Hong Kong retail fund market is limited by its small population. The Greater Bay Area has a population of 70 million, which is 10 times that of Hong Kong’s … it offers a huge expansion opportunity for the Hong Kong fund industry,” Christine Lin, partner, financial services at EY, said in an interview.
The association also wants Beijing to allow overseas managers to directly sell their products in the region. Currently, funds managers that want to sell in mainland China need to be based in Hong Kong.
“This has made it hard for global stock funds to apply to be sold in mainland China,” said Nelson Chow, managing director of the Hong Kong client group at AllianceBernstein Hong Kong.
“This is why 10 out of 15 Hong Kong funds sold in mainland China are Asia focused. If Beijing relaxes the rule, more fund houses can apply to bring their global funds to be sold on the mainland, helping mainland investors adopt a more diversified investment approach,” said Chow.
Hong Kong funds being sold in the Greater Bay Area region can currently offer only up to 50 per cent of total assets being managed by the funds to mainland investors, and the association wants this cap to be waived in the interest of more flexibility. It will also urge Beijing to allow trading in exchange-traded funds listed in Hong Kong and Shenzhen by Hong Kong and mainland investors in the region.
