New guidelines issued by China’s securities regulator say that equity funds with ‘Hong Kong’ in their names must invest at least 80% of their assets in Hong Kong stocks.
The Chinese Securities Regulatory Commission is trying to resolve the problem of funds whose names inferred that they were investing in the Special Administrative Region, but actually had little exposure to the Hong Kong market.
‘If you tell investors that you will invest in “orange” but in fact you invest in “apple”. That does not make sense,’ Mansfield Mok, senior fund manager for China equities at EFG Asset Management, told Citywire Asia.
Mok said that the clarification of the rules was a positive step, and that the new requirement could mean that more money flows into Hong Kong equities, although it is not clear exactly how much capital would need to move to meet the new requirements.
The CSRC also said that Hong Kong-focused funds should have at least two staff, one of which has to be a portfolio manager with at least two years of investment management experience in the SAR. Chinese mutual funds without “Hong Kong” in their names must not invest over 50% of their equity assets in Hong Kong stocks.