The Chinese mainland today launches mutual fund recognition with Hong Kong SAR in a move that facilitates cross-border investment and opens up its capital market even more.
Seven months after the historic launch of the Shanghai-Hong Kong stock connect programme – another key step in the Mainland's plan to speed up further opening its capital markets takes place from July 1st, and it's got Hong Kong right at the heart of it.
The Mainland-Hong Kong Mutual Fund scheme, as it's called, is the first-ever of its kind allowing funds domiciled in Hong Kong and on the Mainland to be sold in each others' markets.
It's what the CSRC Chairman described as the 'next important push forward' after the Stock Connect Scheme, and what Hong Kong Financial Secretary John Tsang considers a 'major breakthrough' for both markets.
On the ground here in Hong Kong, it is what's been keeping Sam Chi Yung and his team at Delta Asia Financial Group busier than ever. He foresees turnover rising further with the new scheme in place.
"Some even open accounts in our firms. It seems they not only want to invest through the scheme but somehow they may try to invest in Hong Kong stocks directly," Sam Chi Yung, strategist with Delta Asia Financial Group, said.
Money managers have been quick to the draw. Ahead of the start of the scheme, Barings Asset Management, one of the world's largest institutional managers, launched last month three Hong Kong-domiciled funds.
While the scheme is now up and running, money managers are still needing some clarity with the rules. Key concerns for Hong Kong-based managers who want to sell their funds to Mainland customers include application procedures, cross-border money transfer and how the quota usage will be reported.
The Stock Connect Scheme faced similar concerns when it launched last November, forcing money managers on a wait-and-see – until they got more clarity on the rules.
This similar lack of clarity on rules though shouldn't diminish the significance of scheme - says independent regional trade association ASIFMA.
"When you have professional managers being able to invest for you in these different types of instruments and allocating risk, that's obviously a better risk diversification than when you're doing it yourself," Eugenie Shen, head of asset management, Asifma, said.
With total quota at 98 billion U.S. dollars, market players look set to be busier, if not replete with investment opportunities, in the months ahead.
