What’s new: Chinese and Hong Kong securities regulators jointly announced plans Tuesday to launch a system to allow eligible investors in the city and the mainland bourses in Shanghai and Shenzhen to buy and sell exchange-traded funds (ETFs) in each other’s markets.
Under the ETF Connect program, trading of eligible funds will start July 4, the Hong Kong Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) said.
The initial batch of eligible ETFs include four Hong Kong funds open to mainland investors and 83 A-share funds open to Hong Kong investors. Investors can trade the ETFs under the existing Mainland-Hong Kong Stock Connect, the regulators said.
“ETF Connect is an important milestone because for the first time Stock Connect is expanded beyond stock trading,” said SFC Chief Executive Officer Ashley Alder. “It will catalyze Hong Kong’s growth as an ETF hub and underscore Hong Kong’s unique role connecting global capital with the mainland.”
The background: China launched the Stock Connect program linking Shanghai and Hong Kong in 2014 and the link with Shenzhen in 2016. The programs have since brought a net inflow of more than 1.6 trillion yuan ($239 billion) of fresh funds to the mainland stock market and a net inflow of more than HK$2.3 trillion ($293 billion) to the Hong Kong market, according to Hong Kong authorities.
An ETF is a basket of securities that is listed on an exchange like a stock, offering exposure to a sector or index without the investor having to buy the underlying assets.
Investors in the mainland and Hong Kong can currently trade stocks and bonds in each other’s markets through the connect programs. Bourses in Hong Kong and the mainland unveiled the plan to add ETFs into the programs in December 2021.
The launch of the ETF Connect comes as the governments are celebrating the 25th anniversary of Hong Kong’s return to China and as Hong Kong tries to strengthen its role as a global financial hub.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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