The corporate flag for Hong Kong Exchanges & Clearing Ltd (right) and the Chinese national flag (left) fly outside the Exchange Square complex in Hong Kong, China on Sept 16, 2019. (PHOTO / BLOOMBERG)
The inclusion of eligible exchange-traded funds will benefit the financial market in both Hong Kong and the Chinese mainland and enhance Hong Kong’s status as an asset management hub in the long term, financial industry practitioners said.
The China Securities Regulatory Commission and the Securities and Futures Commission on Friday night jointly announced that they had reached an agreement to add ETFs to the stock connect programs linking Hong Kong and the mainland.
The China Securities Regulatory Commission and the Securities and Futures Commission on Friday night jointly announced that they had reached an agreement to add ETFs to the stock connect programs linking Hong Kong and the mainland
The implementation plan will be prepared in the next two months, according to the statement.
The statement also noted that Northbound ETFs must be traded in renminbi and have a daily average Assets Under Management over the last six months of no less than 1.5 billion yuan ($225 million), while Southbound ETFs must be traded in Hong Kong dollars with a daily average AUM over the last six months of no less than HK$1.7 billion ($216 million).
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The move follows the Stock Connect, Bond Connect, and Wealth Management Connect programs, becoming another big step on the path to further financial integration between Hong Kong and the mainland.
“It is the first time that financial derivates were included into the connect program, which marks a breakthrough for the cross-border trading schemes,” said Tom Chan Pak-lam, chairman of Hong Kong Institute of Securities Dealers.
“The mainland investors used to buy and sell stocks, but now they can also trade the ETFs, thus the whole trading transactions might have an increase,” Chan said. .
He said the expansion of transactions may also attract more investors and “increase their confidence to some extent.”
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“In the early stage, it is hard to tell what influence the ETFs would bring to the market as more details for the scheme are not announced yet,” Sally Wong Chi-ming, chief executive officer of Hong Kong Investment Funds Association, told China Daily.
“It is definitely a good thing for Hong Kong to enhance its position as a center of asset management as well as ETFs market in the long term,” she said.
“We hope the scope of eligible instrument could be expanded, so that the mainland investors can diversify their asset allocation,” Wong noted.
She suggested that regulators relax some of the entry requirements to attract more players, generating more competition and invigorating the market.
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