However, the regulatory authorities of the two places have not yet made clear the product scope of the wealth management link, and the market still has many different interpretations. Ding Chen, a member of the board of directors of the Hong Kong gold development board, told the 21st century economic report that at the initial stage of its launch, the products should be easy to understand and risk controllable and should be gradually launched. Southbound products can start with products with clear and simple structure, including public funds rated as medium and low risk by distribution banks, bond mutual funds recognized by the Hong Kong Securities Regulatory Commission, and Exchange traded funds or products, monetary funds and other products .
In contrast, in the first eight months of this year, equity funds had a total inflow of $16 billion, with total sales up 52% year-on-year. Although a net outflow of US $797 million was recorded during the period, it was significantly narrowed from the net outflow of $3.9 billion recorded in 2019.
Breaking the pain of mutual recognition of funds
Tu Zhensheng, director of International Securities Research Department of ICBC, told reporters of the 21st century economic report. At present, mutual recognition of funds has been implemented between the mainland and Hong Kong, but the number and scale of funds allowed to be sold between the two places are not large. It is expected that the number and scale of mutual fund products, including bond funds, can be increased under the framework of financelink.
On July 1, 2015, mutual recognition of mutual funds between the mainland and Hong Kong was officially implemented, which means that the mutual fund markets of Hong Kong and the mainland are open to each other. However, since the launch of the plan, it has been hot in the north and cold in the south.
According to the data, as of March this year, a total of 29 funds were allowed to sell northward. The Aum of mainland investors was 14.4 billion yuan. A total of 50 mainland funds were allowed to sell in Hong Kong, while the asset management scale of Hong Kong investors was only $374 million.
Tu Zhensheng admitted that under the current mutual recognition scheme, funds need to be approved one by one, and there is also a certain threshold, so there are not many approved funds. According to the 21st century economic report, Beishang fund is popular with mainland investors because it generally covers overseas markets and its product categories tend to be more diversified, covering global stocks and bonds. In contrast, the sales situation of Nanxia fund has been ignored. In addition to the weakening of RMB exchange rate, the setting of redemption fee for Nanxia fund has also affected its attractiveness.
According to the mutual recognition of funds, the asset size of the fund shall not be less than 200 million yuan or equivalent foreign currency; the fund shall not take the Hong Kong market as the main investment direction; and the proportion of the sales scale in Hong Kong shall not exceed 50% of the total assets of the fund. Take last year as an example, only 6 funds were released in the whole year.
In addition, under the current cross-border fund mutual recognition arrangement, mainland investors investment in Beishang fund is still restricted by the place of registration and can only subscribe to funds registered in Hong Kong.
Ding Chen, a member of the board of directors of the gold development board, and Mr. Qu Jinglin, the chief executive officer of the board of directors, suggested that the cross-border wealth management link could invest in UCITS fund products registered in Hong Kong, recognized by the SFC and approved by the SFC.
The Hong Kong Investment Fund Association (HKIFA) said that it hoped to relax the mutual recognition scheme with respect to the types of fund products, fund approval and practitioners qualifications sold in the Dawan district under the wealth link, such as the mainlands recognition of the qualification of local fund licensees, and the inclusion of funds sold in Hong Kong but not in Hong Kongs registered place into the fortune link.
Cross border big asset management blue ocean
As one of the most developed regions in China, Guangdong, Hong Kong and Macao have gathered a large number of high net worth people. According to Huruns report in 2019, there are 285000 high net worth families with 10 million assets in Guangdong Province, and 679000 rich families with 6 million assets, ranking second in China, accounting for 17.3%.
With the growth of the wealth of mainland residents and the increasing demand for overseas allocation, Hong Kongs bond funds can provide them with more investment options, including the opportunity to invest in overseas bonds and obtain higher returns. Financelink is expected to bring incremental capital to Hong Kongs fund industry, which will help to consolidate the position of Hong Kongs wealth management center. Tu Zhensheng said.
In February 2019, the development planning outline of Guangdong, Hong Kong and Macao Bay Area (hereinafter referred to as the outline) has laid a solid foundation for the coordinated development of Hong Kong, Macao and nine cities in Guangdong Province and the creation of world-class urban agglomerations. The outline defines Hong Kong, Macao, Guangzhou and Shenzhen as the four core cities to promote the development of Guangdong, Hong Kong and Macao Bay area, and clearly positions Hong Kong as a global financial and asset management center.
From the perspective of capital sources, Hong Kong has always been popular with mainland and international investors. For five consecutive years, the proportion of assets derived from non Hong Kong investors exceeded 60%, and about 10% came from the mainland. At the same time, more and more mainland asset management institutions are located in Hong Kong. As of the end of last year, the number of licensed corporations and registered institutions established by mainland related groups in Hong Kong increased by 7% to 387 from 362 at the end of 2018.
Taking Singapore based DBS as an example, 21st century economic report has learned that it has set up a special team in Dawan district last year, and plans to further increase the staff of Dawan district team in the future, and apply for the establishment of a joint venture securities company in mainland China.
Liu Mingyang believes that as the fund is mainly sold through bank platforms, it is expected that banks with branches in Guangdong, Hong Kong and Macao markets will benefit more in the first stage, facilitating investors to handle cross-border account opening and certification. At present, banks are preparing for cross-border account opening, quota allocation, logistics management, and determining which investors can participate. As the accounts opened by investors in banks are of an investment nature, which is different from traditional deposit accounts, banks are also actively discussing with regulators how to improve the account procedures and regulatory details for investors in both places to handle investment functions.
Source: Yang Qian, editor in charge of economic report in the 21st century_ NF4425