Chinese regulations have made it easier for Hong Kong based asset management funds to sell on its stock exchanges. This recent move is seen as an attempt by the Chinese regulatory authorities to open up its markets to foreign investors and institutions. This sounds like good news for JP Morgan asset management as they have finally received a green signal from the local authorities to sell its Asia equity dividend fund as well as its global bond fund on the local stock exchanges in the mainland. JP Morgan will be able to do so through China International Fund Management which is a local joint venture.

‘The mutual recognition of funds’ scheme that was introduced back in 2015 will come in handy in the carrying out the transactions. The scheme allows international asset managers to sell Hong Kong based funds on the Chinese stock exchanges for the first time.

In return, this allows Chinese fund managers to sell Chinese registered funds to investors based in Hong Kong. As a result, there has been a surge in China-based fund flowing into the Hong Kong market lately. Almost 50 of the Chinese fund managers have received approval for distribution in Hong Kong markets ever since the launch of the scheme. On the other hand, 17 of Hong Kong’s registered asset management funds have received approvals as revealed by regulatory data.

Chinese fund managers are happy to be able to move their funds across the border into Hong Kong. In fact, there’s recently been a flurry of Chinese funds piling into the Hong Kong — that too at the fastest rate in over a year by June. The purchases have continued at a similar pace even in the ongoing month of July.

One of the Chinese asset managers revealed in an interview that Hong Kong stocks are more likely to outperform in the second half than the A shares of the Chinese stock exchanges. The difference in discount rates between the shares of the mainland and Hong Kong is at its widest in 16 months. One Chinese asset manager has even gone on to increase the amount of Hong Kong shares by almost 30% of his total assets over the last three months. With that said, asset managers are not exactly giving up on Chinese A shares. Most are holding on to the high end retail and manufacturing shares such as those of liquor makers. Such mainland A shares still figure in their top 10 holdings as revealed by most Chinese asset managers.