Hong Kong’s SFC planning mutual recognition platform with China
24 January 2013
News, China, Hong Kong
By Hui Ching-hoo
Hong Kong’s Securities & Futures Commission (SFC) is looking to push ahead with the development of cross-border fund operations by introducing a mutual recognition platform between mainland China and Hong Kong.
Speaking at the meeting in Hong Kong Securities & Investment Institute, SFC Deputy Chief Executive Officer Alexa Lam notes that the RQFII’s success underscores the strong appeal of the RMB, and the attraction of the Mainland market. The next step is to boldly experiment on the back of this experience, she says.
She goes on to note that the regulator has mutual recognition with Taiwan (for ETFs) and Australia. Mutual recognition arrangements make the process of creating funds, seeking authorisation and selling them in these jurisdictions easier, thus saving cost and time. But the situation is different in the case of cross-border selling between the Mainland and Hong Kong. Because of capital account restrictions in the Mainland, cross selling of funds between the Mainland and Hong Kong is effectively off limits. There is simply no channel for Hong Kong authorised funds to directly sell to investors in the Mainland; and investors outside the Mainland cannot invest in Mainland-authorised funds.
Ms. Lam remarks that the Mainland-Hong Kong mutual recognition initiative will open the gate to this mutual traffic flow, for the first time. This will be a very substantial breakthrough.
“Under this arrangement, we envisage that qualified SFC-authorised funds domiciled in and operating from Hong Kong would enjoy the status of “recognised Hong Kong funds”, and qualified Mainland funds would enjoy the status of “recognised Mainland funds”. These recognised funds could then obtain authorisation and be sold directly in the other’s market,” she adds.
“In addition, recognised funds from the Mainland would enrich the product offerings available in Hong Kong. The Mainland has a diverse pool of public funds. I believe these funds would have a strong appeal to Hong Kong and international investment community. This would mean more sales opportunities for product distributors here.”
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