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RPT-China puts cross-border investment funds sale plan on backburner
May 15, 2015 / 12:03 AM / 2 years ago

RPT-China puts cross-border investment funds sale plan on backburner

(Repeats story that ran late on Thursday, with no change to text)

* China money managers worry about competition from global giants

* Focus is on getting Hong Kong-Shenzhen trading link off ground

* China total investable assets seen hitting 260 trl yuan by 2020

By Lisa Jucca and Michelle Chen

HONG KONG, May 14 (Reuters) - China’s plan to allow cross-border sales of investment funds between the mainland and Hong Kong appears to have lost momentum after opposition from domestic money managers who fear being overwhelmed by global competitors, industry players say.

Global asset managers, who want to grab a bigger slice of investable money in China, are eagerly awaiting the launch of the so-called mutual fund recognition, or passporting, scheme, which will allow them to sell funds directly in China without having to set up operations in the mainland.

But China seems, instead, to be focused on adding a stock-trading link-up between Hong Kong and Shenzhen to its existing Hong Kong-Shanghai connect.

“It seems the funds passporting scheme is currently on the backburner and will remain there until the Shenzhen connect comes into place,” said Lawrence Au, who heads BNP Paribas Securities Services across the Asia-Pacific region.

“While foreign managers want access to domestic investors, many Chinese funds managers are not particularly keen on the scheme as they already have access to Hong Kong. The scheme would introduce greater competition in their home turf.”

A source who is in direct contact with Chinese regulators said Chinese asset managers had requested more time to establish themselves before facing more competition at home.

The China Securities Regulatory Commission declined to comment when contacted by Reuters. The Securities & Futures Commission in Hong Kong also declined to comment.

China’s mutual funds industry, established less than two decades ago, is nascent compared to the global funds industry which has sophisticated players such as Fidelity Investments, Vanguard Group and BlackRock Inc.

“Addressing the potential loss of market share concern of onshore fund managers is one of the key hurdles to move mutual recognition forward,” said Lachlan Campbell, Chief Operating Officer at asset manager Income Partners in Hong Kong.

China had an estimated 145 trillion yuan ($23.37 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.

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

While a landmark stock trading link between Shanghai and Hong Kong was rolled out within seven months of Chinese Premier Li Keqiang announcing it in late April 2014, regulators have yet to announce a launch date for the funds passporting scheme.

Although the Irish Funds Industry Association said it was hopeful the mutual recognition scheme would be activated this year, several industry participants said they were seeing limited progress.

“We haven’t heard any progress of mutual fund recognition for quite a long time and it seems nobody in the industry is talking about it,” said a deputy CEO at a Chinese asset management firm. ($1 = 6.2043 Chinese yuan renminbi) (Additional reporting by Michelle Price; Editing by Muralikumar Anantharaman)

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