The initial investment quota for the Mainland-Hong Kong Mutual Recognition of Funds (MRF) initiative will be RMB600bn ($97bn, £62bn), split evenly in each direction.
Announced on Friday, the “milestone” initiative – signed by the China Securities Regulatory Commission (CSRC) and Hong Kong’s Securities and Futures Commission (SFC) – is designed to streamline procedures, making it easier to sell funds to retail investors in each other’s market.
The progress on mutual fund recognition will come as a surprise to many in the financial industry, who believed it to be years away.
However, the successful cross-border regulatory cooperation that emerged when developing the ‘Stock Connect’ investment channel no doubt smoothed the path for the mutual fund pact.
"The initiative is a “major breakthrough” in the opening up of the mainland’s funds market."
Major breakthrough
The SFC’s chairman, Carlson Tong haild the initiative as a “major breakthrough” in the opening up of the mainland’s funds market to offshore funds.
“More importantly, this initiative will lay the foundation for the CSRC and SFC to jointly develop a fund regulatory standard, promoting the integration and development of the Asian asset management industry,” he said.
In a statement, the SFC said the broadening of the cross-border investment channel will enhance the competitiveness of mainland China and Hong Kong fund markets.
Chief executive of Asia-Pacific for Investment Company Institute (ICI) Global, Qiumei Yang, said he hoped the initiative would expand to include more funds and fund managers, but said it would still benefit investors and fund managers globally, offering a wider range of investment choices and expanding the fund market.
“Regulators from both markets deserve praise for creating this initial framework for a strong cross-border regulatory regime, and for their careful preparations to ensure a smooth implementation,” he said.
Baring Asset Management, which recently launched three Hong Kong domiciled funds, stands to benefit as the funds will be open to mainland investors.
