China and Hong Kong regulators agreed to include eligible exchange-traded funds (ETFs) in the Stock Connect program.
The China Securities Regulatory Commission (CSRC) and the Hong Kong Securities and Futures Commission (SFC) announced Friday that they agreed in principle to include ETFs listed on both Hong Kong and Mainland exchanges in the Stock Connect program.
The Stock Connect program was started in 2016 and was then seen as an important step in internationalizing China’s financial markets. The program allows investors in Hong Kong and China to trade selected shares on each other’s markets and it has allowed overseas investors access to mainland A-shares.
ETF Eligibility
The eligibility of ETFs for inclusion will be based on a number of factors. These include the size of the fund and whether the index tracks stocks that are eligible for Stock Connect, the regulators said in a press release.
Hong Kong Exchanges and Clearing (HKEx) CEO Nicolas Aguzin said in a separate statement: «This is the next exciting development in our Connect Programme. ETF inclusion in Stock Connect will be mutually beneficial to both Mainland China and Hong Kong’s capital markets, supporting the continued sustainable growth of both, at a time that participants and customers are demanding ever more and better connectivity.»
In April, the Shanghai Connect Northbound, or flows into Mainland markets, had total trades of CNY799.34 billion (US$119.71 billion), down nearly 30 percent from March’s level, while the Shenzhen Connect Northbound had April turnover of CNY831.47 billion, down nearly 33 percent from the previous month, according to data posted on HKEx’s website.
The Shanghai Connect Southbound, or trading by Mainland investors in Hong Kong shares, had April turnover of HK$192.12 billion (US$24.48 billion), down 61 percent from March, while the Shenzhen Connect Southbound had turnover of HK$179.88 billion, down nearly 59 percent from March, the data showed.
