HKMA's Chan praises cross-border funds initiative as liberalisation milestone

Hong Kong Monetary Authority (HKMA) chief executive Norman Chan has praised a new initiative to further integrate Hong Kong's and China's capital markets as a "milestone" of Chinese financial liberalisation.

China's Securities Regulatory Commission (CSRC) and Hong Kong's Securities and Futures Commission (SFC) announced the mainland-Hong Kong Mutual Recognition of Funds (MRF) initiative on Friday (May 22).

The MRF will allow eligible and approved Chinese and Hong Kong-based funds access to retail investors in each other's market. It will come into effect on July 1 with an initial investment quota of 300 billion renminbi for "in and out fund flows each way".

"The MRF will deepen the exchange and cooperation of the mainland and Hong Kong asset management industries, broaden cross-border investment channels, and enhance the competitiveness of the mainland and Hong Kong fund markets," the CSRC and the SFC said in a statement.

They added the MRF will eventually allow for the development of a joint regulatory standard and, in doing so, help integrate and develop the asset management industry in Asia more widely.

"This is another milestone in the liberalisation of the mainland's capital account after the establishment of mutual stock market access between Shanghai and Hong Kong," said Chan in a comment.

He added mutual recognition of funds would also deepen regulatory cooperation between Hong Kong and China. The HKMA, Chan said, is also working alongside the relvant institutions in China to establish a fund processing platform to "provide an automatic channel for cross-border transactions and cash settlement".

The CSRC and SFC will hold briefings to explain to the market the application procedures and requirements for the MRF, allowing market participants to understand the "differences in laws and regulations, business requirements and operations of the two markets".