China and its special administrative region of Hong Kong on Friday announced they will allow cross-border sales of investment funds to retail investors, saying it will increase financial cooperation.
Market regulators from both sides said the “mutual recognition” of funds would allow mainland China and Hong Kong funds to be distributed in each other’s markets from July 1, Hong Kong’s Securities and Futures Commission (SFC) said in a statement.
“The mutual recognition of funds initiative is a major breakthrough in the opening up of the mainland’s funds market to offshore funds,” SFC Chairman Carlson Tong said in the statement.
“It will also open up a new frontier for the mainland and Hong Kong asset management industries and make available a wider selection of fund products to investors in both markets,” he said.
The effective date, July 1, is the anniversary of the return of the former British colony to Chinese rule in 1997.
In a joint statement, the SFC and the China Securities Regulatory Commission called the move an “important milestone”.
“The (mutual recognition of funds) is an important element in the opening up of the mainland’s capital market,” it said, adding the quota for each side had been set at 300 billion yuan (HKD375 billion).
China keeps a tight grip on its capital markets, out of fears sudden inflows or outflows of funds could threaten financial stability and reduce its control.
Currently, overseas fund management companies need to set up joint ventures with Chinese partners to sell their products in the domestic market.
In November last year, the stock market in the Chinese financial hub of Shanghai and the Hong Kong bourse launched a scheme allowing investors on each exchange to trade selected stocks on the other through their existing accounts.
“Besides stocks, mainland investors can now invest in the fund products of Hong Kong’s fund companies and vice versa,” Haitong Securities analyst Zhang Qi told AFP.
“The main impact will be an expansion of investment channels for mainland and Hong Kong investors.”
Words: AFP
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