Mutual Recognition of Funds Information

As the premium choice for RMB services, NCB offers you all-round ¡§Recognised Mainland Fund¡¨ investment services, helping you grasp the investment opportunities in the Mainland.

Introduction of MRF

Q: What is Mainland-Hong Kong Mutual Recognition of Funds (MRF)?

A: Effective from 1 July 2015, Mainland and Hong Kong publicly offered funds that fulfill the eligibility requirements are allowed to follow streamlined approval procedure to obtain authorization of public offering in the host jurisdiction¡G


Q: Any eligibility requirements should the funds meet to obtain the MRF authorization?

A: Both Mainland and Hong Kong funds need to meet the eligibility requirements as below:

Establishment Requirement
  • Established, managed and operated in accordance with the laws and regulations of home jurisdiction
  • Regulated by regulatory body in the home jurisdiction
  • Publicly offered funds domiciled in the home jurisdiction
Year of Establishment
  • Established over 1 year
Minimum Fund size
  • Not less than RMB 200 million (or its equivalent in a different currency)
Investment Scope
  • Not primarily invested in the host market
  • Equity funds, mixed funds, bond funds, unlisted index funds and physical index-tracking exchange traded funds
Value of Sales
  • Value of shares / units in the fund sold to investors in the host jurisdiction shall not be more than 50% of the value of the fund's total assets
  • Must appoint a licensed or registered firm in the host jurisdiction to be its representative.

Q: Is there any investment quota restriction on the Mainland-Hong Kong MRF?

A: The investment quota is set at RMB300 billion for fund flows between the Mainland and Hong Kong each way, controlled by the State Administration of Foreign Exchange.

Source: China Securities Regulatory Commission website, Securities and Futures Commission of Hong Kong website, compiled by NCB, as of June 2015


How Local Investors Benefit?

The launch of MRF enriches the choice of financial products to local investors, broadens their investment horizon in the Mainland market:

A New Way to Invest in RMB

The RMB deposits in Hong Kong reached up to RMB955.2 billion1. The RMB products have become popular and favored by investors in recent years. RMB products in the local market can be divided into 2 types: onshore and offshore. Through investing in Recognised Mainland Funds, local investors are able to participate in the Mainland market via different assets.

Range of Major RMB Investment Products

RQFII ¢w Refers to RMB Qualified Foreign Institutional Investors
ETF ¢w Refers to Exchange traded funds

Remark 1¡GSource: Hong Kong Monetary Authority, as of April 2015

More Comprehensive Mainland Market Exposure

Before the launch of MRF, local investors who would like to directly participate in the Mainland market in form of fund investment can only invest in Qualified Foreign Institutional Investors (QFII) funds or RMB Qualified Foreign Institutional Investors (RQFII) funds.

The launch of MRF pulls in Recognised Mainland Funds which open up new onshore investment channel for local investors.

Onshore Mainland Funds comparison:

  QFII Funds RQFII Funds Recognised Mainland Funds
Settlement Currency USD RMB RMB
Product Issuer

Foreign Fund Houses

Chinese Fund Houses/
Securities Firms
in Hong Kong

Fund Houses

Fund Type Mainly equity funds Mainly bond funds Equity, mixed, bond, unlisted
index and physical
index-tracking exchange traded funds
General Asset Allocation Varies
  • Bond Funds
    At least 80% invested in bond
  • Equity Funds
    At least 70% invested in equity
  • Bond Funds
    At least 80% invested in bond
  • Equity Funds
    At least 80% invested in equity
  • Mixed Funds
    Invest in bond, equity, money market instruments or other funds with flexible allocation other than bond funds and equity funds
Quota Restriction Depends on individual quota applied by fund houses
  • Overall quota of RMB270 billion, controlled by the State Administration of Foreign Exchange2
  • Depends on individual quota applied by fund houses/ securities firms
  • Overall quota of RMB300 billion, controlled by the State Administration of Foreign Exchange
  • Value of shares / units sold to investor in Hong Kong not more than 50% of the fund's total assets

Remark2¡GSource: State Administration of Foreign Exchange, as of May 2015

How can Recognised Mainland Funds Fulfill Different Investment Needs?

Source: China Securities Regulatory Commission website, Securities and Futures Commission of Hong Kong website, compiled by NCB, as of June 2015

NCB Advantages

Being the expert in cross-border investment and RMB services, NCB endeavours to provide quality and efficient RMB financial services:

Cross-border Investment and RMB Expert

Partnership with Mainland professionals to Offer Diverse Range of Fund Choices

Strong Network in the Mainland and Hong Kong


Important Notes
The following Risk Disclosure Statement may not disclose all the risks involved. You should undertake your own research and study before you trade or invest. You should carefully consider whether trading or investment is suitable in light of your own financial position and investment objectives.

Risk Disclosure Statement
The above information is for reference only. This webpage does not constitute any offer, solicitation, recommendation, comment or any guarantee to the purchase or sale of any investment products or services. The investment products or services mentioned in this webpage are not equivalent to, nor should it be treated as a substitute for, time deposit. Although investment may bring profit opportunities, each investment product or service involves potential risks. Due to dynamic changes in the market, the price movement and volatility of investment products may not be the same as expected by you. Your fund may increase or reduce due to the purchase or sale of investment products. The value of investment funds may go up as well as down and the investment funds may become valueless. Therefore, you may not receive any return from investment funds. Part of your investment may not be able to liquidate immediately under certain market situation. The investment decision is yours but you should not invest in these products unless the intermediary who sells them to you has explained to you that these products are suitable for you having regard to your financial situation, investment experience and investment objectives. Before making any investment decisions, you should consider your own financial situation, investment objectives and experiences, risk acceptance and ability to understand the nature and risks of the relevant product. Investment involves risks. Please refer to the relevant fund offering documents for further details including risk factors. If you have any inquiries on this Risk Disclosure Statement or the nature and risks involved in trading or funds etc, you should seek advice from independent financial adviser.

Risks Associated with the MRF Arrangement

Concentration risk / Mainland market risk
The Fund invests primarily in securities related to the Mainland market and may be subject to additional concentration risk. Compared to investment in other markets, investing in the Mainland may give rise to different risks including political, policy, tax, economic, foreign exchange, legal, regulatory and liquidity risks.

RMB currency and conversion risks
RMB is currently not freely convertible and is subject to exchange controls and restrictions.

Non-RMB based investors are exposed to foreign exchange risk and there is no guarantee that the value of RMB against the investors' base currencies (for example HKD) will not depreciate. Any depreciation of RMB could adversely affect the value of investor's investment in the Fund.

Investors may not receive RMB upon redemption of investments and/or dividend payment or such payment may be delayed due to the exchange controls and restrictions applicable to RMB.

RMB Conversion Limitation Risk
RMB investments are subject to exchange rate fluctuations which may provide both opportunities and risks. The fluctuation in the exchange rate of RMB may result in losses in the event that the customer converts RMB into HKD or other foreign currencies.

This webpage is issued by Nanyang Commercial Bank Limited. The contents of this webpage have not been reviewed by the Securities and Futures Commission in Hong Kong.