Date
25 March 2017
Franco Ngan (left) and Terry Pan (right)  have contrasting views about Chinese expectations regarding fund yields. Photo: HKEJ
Franco Ngan (left) and Terry Pan (right) have contrasting views about Chinese expectations regarding fund yields. Photo: HKEJ

Mutual recognition deal to spur China fund inflow

An impending cross-border agreement on mutual recognition of funds is likely to spur more investment flows to mainland China than Hong Kong initially, the Hong Kong Economic Journal reported Monday.

These will be driven by increased demand for mainland financial products from Hong Kong investors, coupled with a large number of mainland funds, the report said, citing Terry Pan, chief executive for Greater China, Singapore and South Korea of Invesco Asset Management Asia Ltd.

Regulators in Hong Kong and mainland China are expected to unveil the agreement next month.     

The deal sets the criteria for funds to be recognized in each other’s jurisdiction.

Invesco Great Wall Fund Management Co. Ltd., Invesco’s partner in China, has launched 30 funds in the mainland but will only sell several of them in Hong Kong initially, Pan said.  

Funds are required to have been in operation for more than one year and have no less than 200 million yuan (US$32.18 million) of assets under management.

About 100 funds in Hong Kong and 850 from the mainland are eligible for the scheme.

Mainland regulators have asked Hong Kong funds to make their products simple enough to pitch to domestic investors given the gap in the development of the fund management market between the two sides.

With certain trust products in the mainland paying up to 10 percent return, Pan is worried Chinese investors might expect as much from Hong Kong funds.

Franco Ngan, chief executive of Zeal Asset Management Ltd. and former chief executive of Asia hedge funds Value Partners, ruled out any such expectations.

“The rules of the game are about to change,” Ngan said.

“It is no longer a matter of marketing but attracting more fund houses to offer products in Hong Kong.”

He said 80 percent of funds sold in Hong Kong are registered overseas.

Translation by Vey Wong

[Chinese version中文版]

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Hong Kong Economic Journal

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