Global Trustee and Fiduciary Services News and Views Issue 53

Markets and Securities Services | Asia 72 Arguably, the most successful of these routes has been Stock Connect, whereby global investors can make direct purchases of Mainland China A shares via a securities broker account in Hong Kong. This is a two-way facility that has also been very successful in enabling Chinese investors to buy Hong Kong-listed securities. Another of the routes is Mutual Recognition of Funds (MRF), which allows mutual funds and unit trusts domiciled in China and Hong Kong cross-border access for local investors in each other’s location. MRF acts as a funds-passporting scheme. To date, there has been limited success, with around 20 Hong Kong-domiciled funds approved for sale in China and around 50 Chinese funds approved for sale in Hong Kong. Industry observers believe the longer-term nature of this development and the potential for future success will see an increase in the numbers of eligible funds and so greater competition among distributors. Bond Connect has also been developed to give global investors direct access to the wide range of bond and fixed-income issues in China. While the China Interbank Bond Market route attracted much interest at first, Bond Connect appeals to a larger, more diverse audience and has resulted in a high degree of self-control for managers using it. R/QFII The Qualifying Foreign Institutional Investors (QFII) scheme was first set up in 2002 as a way in which to allow global fund managers some limited but direct access to Mainland China equity and bond securities markets. Quotas were given to individual asset owners or fund managers. Some restrictions were applicable to the extent of turnover allowed, to the repatriation of assets and to profits. The “R” version, whereby assets could be held in renminbi, was launched in 2011.