Citi Research said it views Mutual Recognition of Funds (MRF) between the Mainland and HK a significant capital market open-up initiative, which could accelerate the integration of A/H capital markets, given easier retailor participation in both A/H markets.
The research house believes the direct beneficiaries should be the secondary market asset managers, although the extent of benefit could be limited at the initial stage.
Citi believes MRF is more favorable to H-share because its access to much bigger retailor market, as the mainland deposit scale is 15x bigger than HK. More experienced HK MFs, with longer proven track record, should be more competitive than mainland MFs (avg. portfolio manager experience less than three years'), especially given the rising demand of China households' global asset allocation.
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