Euroclear to gain access to China-domiciled funds

Chinese flagBrussels-based depository bank Euroclear looks set to gain access to China-domiciled funds as Hong Kong’s Securities and Futures Commission and the China Securities Regulatory Commission announced their Mutual Recognition of Funds (MRF) initiative.

Euroclear has opened an account with Hong Kong’s Central Securities Depository, the Central Moneymarkets Unit (CMU). Euroclear will be able to participate in mutual fund recognition through its account with the CMU.

Mutual fund recognition will allow eligible Hong Kong-domiciled funds to be sold to retail investors in China, and qualifying Chinese funds will also be available to the retail investor base in Hong Kong.

With this new CMU account, Euroclear Bank will be able to access China-domiciled funds through Euroclear’s automated fund processing platform - ‘FundSettle’, in addition to the existing availability of Hong Kong-domiciled funds.

Ivan Nicora, chief executive officer of the Hong Kong branch and regional head of Asia-Pacific, Euroclear, says: “The ability to gain access to China domiciled funds under the MRF arrangement is a major development.

“This initiative reinforces our Asia growth strategy as we continue to support the development of the MRF as we endeavour to facilitate an international link to this market. We expect demand to grow significantly in the next three to five years.”

In a recent interview with Funds Europe, Denise Voss, the chairman of the Association Luxembourgeoise des Fonds d'Investissement (Alfi), said she was not overly concerned by this new development as competition to Ucits funds, because these latter funds are distributed all over the world. However, she did say: “We’re interested in watching what happens as many of our members will set up funds to take advantage of mutual recognition.”

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