Mutual recognition fund platform raises hopes in Hong Kong

Hong Kong and China look forward to new liberalization initiative.

An announcement by the Hong Kong Securities and Futures Commission (SFC), of an initiative to allow cross-border fund sales is receiving support from the funds industry in Hong Kong and China.

The proposal would establish a mutual recognition fund platform for Hong Kong-domiciled funds to be sold in mainland China and for funds from China to be sold in Hong Kong. It will allow mainland fund management firms to offer funds more easily in Hong Kong and give them direct access to the offshore and international market.

For Hong Kong fund managers, access to the mainland savings market requires an onshore presence in a joint-venture.

A common fund platform that can serve both Hong Kong and the mainland will give the funds industry in both markets a huge boost and would position Hong Kong more competitively compared to other locations such as Singapore.

A mutual fund recognition arrangement would take account of the lessons learned from the flawed Qualified Domestic Institutional Investor scheme.

Under China’s QDII, the China Securities Regulatory Commission, the financial regulator, granted a limited avenue for institutional investors such as banks, funds and investment companies to invest in foreign-based securities.