Date
24 September 2017
Regulators face a bigger challenge ensuring protection for fund investors than in the through-train stock trading program.
Regulators face a bigger challenge ensuring protection for fund investors than in the through-train stock trading program.

Mutual recognition scheme seen limited to established funds

China is likely to limit a mutual recognition mechanism for cross-border fund trading to established funds, Sally Wong, chief executive of the Hong Kong Investment Funds Association, said Wednesday.

Regulators face a bigger challenge ensuring protection for fund investors than stock investors in the co-called “through-train” equities trading program. That is because funds come in a variety of categories such as bonds, mixed assets and global funds, Wong said.

Although the funds in the scheme will not be too new or too complex, there are more choices, making them more difficult to regulate, she said.

Bruno Lee, chairman of the association’s unit trust sub-committee, said that fund products covered by the mutual recognition scheme would have to be straightforward.

Such simple funds will be attractive to mainlanders investing in the Hong Kong market, making them competitive with stocks.

Under the through-train cross-border scheme, expected to start in October, the Hong Kong and Shanghai stock exchanges can trade equities in each other’s market.

Mutual recognition arrangements make the process of creating funds, seeking authorisation and selling them between jurisdictions easier, saving time and money.

But the situation is complicated in the case of cross-border fund sales between the mainland and Hong Kong because of the latter’s capital account restrictions.

– Contact the writer at [email protected]

JH/JP/RA

 

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