The Hong Kong Securities & Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) agreed to the inclusion of eligible exchange-traded funds (ETFs) as part of the mutual stock market access arrangement – called ‘Stock Connect’ – between Mainland China and Hong Kong as from 4 July.
The inclusion of ETFs as tradeable products in Stock Connect is designed to broaden the scope of investment opportunities for domestic and overseas investors. It will allow Hong Kong and Mainland investors – both individual and institutional – to trade eligible ETFs listed on their respective exchanges via local securities firms or brokers.
Under ETF Connect, only Mainland and Hong Kong ETFs that satisfy their respective Northbound or Southbound regulatory requirements will be eligible to be included in Stock Connect. These requirements include but are not limited to:
- The ETF must be traded in the requisite currency – RMB or HKD – and have met the minimum threshold of daily average assets under management in the last six months.
- The ETF must have been listed on the Hong Kong Stock Exchange (HKEX), Shanghai Stock Exchange (SSE) or Shenzhen Stock Exchange (SZSE) for at least six months.
- The respective benchmark indexes tracked by the Mainland ETF or Hong Kong ETF must have been launched for at least one year and must satisfy certain criteria in relation to the composition of stocks and the weighting of its constituents.
Eligible ETFs will be subject to regular review, and where an Eligible ETF falls below certain thresholds, it will be designated as a ‘sell-only’ security, meaning that investors may sell existing holdings but will be restricted from buying such an ETF.
Nicolas Aguzin, Chief Executive Officer of HKEX, said: The inclusion of eligible ETFs in Stock Connect since 4 July 2022 marked another milestone in our landmark mutual market access programmes, further deepening connectivity between Hong Kong and Mainland China’s capital markets and supporting the continued development of the region’s ETF ecosystem.
“With the rollout of the first blockchain ETF, first metaverse-themed ETF, first carbon futures ETF and first pure-play Hong Kong equity ESG ETF during the period, our ETF offering has strengthened and diversified, supporting Hong Kong’s position as Asia’s preferred ETF marketplace.”