Hong Kong, China mutual fund recognition to be announced soon: sources

[HONG KONG] A mutual fund recognition agreement between China and Hong Kong that will allow global asset managers to grab a bigger slice of money available for investment in China and vice versa will be announced soon, two sources told Reuters on Thursday.

Regulators in China and Hong Kong are set to announce the long-awaited policy soon, the two official sources with direct knowledge of the matter said.

The Securities and Futures Commission in Hong Kong declined to comment. Calls made by Reuters to the China Securities Regulatory Commission were unanswered.

Hong Kong's and China's securities regulators started discussing mutual recognition for fund products in 2012 and reached a preliminary agreement in 2013.

However, the plan has been on the backburner since as Beijing focused on other schemes such as the Shanghai-Hong Kong stock connect to facilitate cross-border investment, industry players said. "My understanding is that China is trying to build up platforms that are more important in terms of capital account liberalisation and easier in operation," said a person familiar with fund operations in Hong Kong.

China had an estimated 145 trillion yuan (US$23.4 trillion) in total investable assets as of end-2013, which is expected to grow to 260 trillion yuan by 2020, according to data from international consultancy Oliver Wyman.

Under the mutual fund recognition scheme, Hong Kong is aiming to encourage money managers to base their funds in the city as it looks to correct a historic skew that has reduced it to largely a sales and marketing hub for funds.

The deal will give fund managers greater incentive to set up more Hong Kong-domiciled funds to gain access to the huge pool of savings on the mainland, lead to more jobs in the city and consolidate Hong Kong's position as the leading asset management hub in Asia.

REUTERS