Standard Chartered will be participating in the Hong Kong-China mutual recognition scheme which launches this week, the bank has told AsianInvestor.
The bank’s head of wealth management for Greater China said she was keen on offering renminbi and products in the bank's branches, but preferably from only one fund house.
However, the wealth head said she expected investors to adopt a wait-and-see attitude with investment flows dependent on various factors, including the performance of China A shares.
Vicky Kong, regional head of wealth management for Greater China, told AsianInvestor that StanChart had been preparing for mutual recognition as it was keen to distribute funds under this scheme in its branches in Hong Kong and China. The scheme will go live this Wednesday (July 1), after a start date was announced last month.
The bank has started conducting due diligence on fund houses it hasn’t worked with before while it waits for them to register their funds from July 1 onwards. The funds are expected to be approved within one month from registration. There are more than 100 eligible Hong Kong funds and more than 800 eligible mainland China funds.
Hong Kong-based Kong said that based on her conversations with Hong Kong fund houses, not all of the big firms will be rushing to register their funds. Some will wait and see how the market responds and what their competitors do before taking action. Kong said that was fine as she did not believe there would be a big first-mover advantage. “It is favourable in terms of branding but I doubt it will make a huge impact in terms of investment flows in the long run,” she said.
On mainland Chinese fund houses, Kong said StanChart was looking at the list of fund houses and their products. She said there were some variables in the way mainland fund houses operated compared to international houses in Hong Kong. However, she noted that mainland fund houses were keen to meet international standards, so said she was not worried about having them on the bank's platform.
Of the types of funds to be provided, Kong said she was keen on renminbi products given positive views of the currency and the increasing number of depositors holding it in Hong Kong.
Kong said StanChart would look to have renminbi equities and fixed income funds, but preferably with just one fund house providing a range of renminbi products. This would mean the bank could avoid having to charge clients upfront fees for switching from one asset class to another.
“If I focus on being overweight on an equity fund, I would want to add a balanced or a fixed income fund from the same manager to give clients options because they might switch from one asset class to another, and this will minimise their transaction cost,” Kong said.
The bank is also keen to have more funds with regular income distribution. “I will look at this space,” she said, and would recommend it to clients who are pure depositors, especially those holding renminbi who would benefit from moving money away from low deposit rates.
Kong, however, said demand for mutual recognition funds will not initially be huge. “Will investors take action? I don’t think they will rush."
“The market sentiment changes all the time,” she added, and investors might shun mutual funds to take advantage of A shares first. “It will take some time for the scheme to be in full swing,” she said.
Despite this, Kong said distributors have to get ready.
“To get ready is to make sure that we are in close conversation with the fund houses and we know what they are doing. We are also meeting with their local sales teams to make sure we are comfortable with the support they can provide,” Kong said.
Standard Chartered Bank has about 105 branches in 20 cities in mainland China and about 70 of these have retail/wealth management solutions, including qualified domestic institutional investor (QDII) and local funds. It has more than 100 funds in mainland China. In Hong Kong, the bank has about 400 funds on its shelves.