It’s not just about Hong Kong.
The mutual recognition of funds agreement between Hong Kong and China that will start next week is aimed at developing not just the fund management industry between the two signatories, but also the whole of Asia, according to a high-ranking official of the Securities Futures Commission.
“Our goal now is to work together with the Mainland to implement the scheme in a manner which will serve as a foundation for promoting the development and integration of the Asian asset management industry. In short, the door does not just lead you to the Mainland,” said Julia Leung, executive director for investments products at SFC, Hong Kong’s securities watchdog.
The scheme, set to take effect on July 1, will allow Hong Kong-domiciled funds to offer mutual fund products to investors in the mainland and vice versa. An initial investment quota of 600 billion yuan ($97 billion) – or 300 billion yuan each for Hong Kong and China – has been set.
To qualify under the program, plain vanilla funds must have a track record of at least one year and a minimum size of 200 million or its equivalent.
Funds in the former British colony are anticipating a dramatic jump in sales with the implementation of the scheme. Hong Kong Investment Fund Association chairman Bruno Lee say that the quota alone given to Hong Kong is equivalent to a 62% of Hong Kong’s mutual fund sales last year, according to the South China Morning Post. Foreign funds are also expected to set up shop in Hong Kong so that they could sell their products to Chinese investors.
Because of the expected tremendous benefit to the city, Secretary for financial services and the treasury Chan Ka-keung was quoted in a news report as saying that the Hong Kong government has asked China to let the former British colony enjoy this exclusive program with the mainland before it is opened to other countries.
But Leung said asking whether this will be an exclusive arrangement between Hong Kong and China and for how long are the wrong questions to ponder.
“You may ask this question – is this an exclusive arrangement, and for how long? Will similar arrangement be struck with other markets, in the same way RQFII quotas are allocated to other markets? These are the wrong questions to ask. In front of you is a pathway through Hong Kong to sell funds to the Mainland. The question is, should you walk through this door, or should you wait for another door to open somewhere else?” said Lueng.
It was clear from the start that the scheme is intended to jumpstart China’s and Hong Kong’s vision “of a more integrated Asian financial market where Asian savings can be more effectively channeled to fund Asian investments,” said Leung.
Photo credit: Jessie Wang via Flickr