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Chinese, HK fund managers start to apply for mutual recognition

[HONG KONG] Asset managers in China and Hong Kong have started to submit applications to participate in the mutual recognition of funds (MRF) scheme that allows funds to be sold across both markets from July 1, keen to tap new clients but treading carefully.

Invesco Hong Kong, JP Morgan Asset Management (JPMAM) and its China International Fund Management (CIFM) joint venture as well as Bank of China Hong Kong Asset Management were among funds that handed in applications to regulators immediately after the official launch of the scheme. "MRF lays a foundation for the continued development of the asset management industry in mainland China and Hong Kong, and sets an example for the entire region," said Michael Falcon, head of the Asia Pacific funds business at JP Morgan.

JPMAM will act as CIFM's local representative in Hong Kong while CIFM will perform the same role for JPMAM in mainland China under the programme.

Invesco Hong Kong said it planned to launch an A-share-focused mixed securities fund managed by Invesco Great Wall Fund Management, its joint venture in China, and it had filed an application to the Hong Kong Securities and Futures Commission.

More than 20 of Invesco Great Wall's mutual funds, representing more than 60 per cent of its mutual fund assets under management, will be eligible to join the scheme by the end of this year.

Chinese and Hong Kong regulators announced the mutual recognition programme on May 22, marking another step in liberalising China's capital account following the November launch of the Hong Kong-Shanghai "Stock Connect" trading link.

About 100 Hong Kong-domiciled funds and 850 mainland Chinese funds are qualified for the scheme, according to the China Securities Regulatory Commission (CSRC).

Although fund managers are excited about the opportunity to expand their business, many say they will enter the Chinese market slowly with one or two funds at first due to uncertain demand and logistical difficulties. "For asset managers in Hong Kong and Mainland China, short-term challenges of the MRF would be the operational flow and efficiency of transaction and settlement," said Terry Pan, Invesco's chief executive officer for Greater China, Singapore and Korea.

Ensuring investors are fully aware of the different features of funds in the two jurisdictions would be another challenge, Mr Pan said.