Xinhua News Agency, Shanghai, July 4th: ETFs are included in the interconnection capital market, and cross-border opening up continues to deepen
Xinhua News Agency reporters Pan Qing and Yao Junfang
The picture shows the second phase of the Hong Kong International Finance Centre (drone photo).Photo by Xinhua News Agency reporter Li Gang
The cross-border two-way opening of my country’s capital market continues to deepen. On the 4th, the exchange-traded funds (ETFs) were officially incorporated into the mainland and Hong Kong stock market trading interconnection mechanism, and 53 Shanghai Stock Connect ETFs, 30 Shenzhen Stock Connect ETFs and 4 Hong Kong Stock Connect ETFs were the first batch of “early adopters”.
As a landmark achievement of the upgrade of the interconnection mechanism, the ETF is included in the interconnection based on the infrastructure connection of the stock interconnection. The main institutional arrangements refer to the stock interconnection and follow the current fund operation, transaction settlement laws and regulations and operation modes of the two places.
Based on the principles of fund size and stock selection based on the interconnection and interoperability of the underlying stocks, the two places determine the eligible Mainland ETFs and Hong Kong ETFs to be included in the scope of the underlying. With the approval of the China Securities Regulatory Commission and the Hong Kong Securities Regulatory Commission, the two exchanges may adjust the scope of inclusion under the framework of stock interconnection according to the operating conditions.
Since the opening of the Shanghai-Hong Kong Stock Connect on November 17, 2014, the trading interconnection mechanism between the mainland and Hong Kong stock markets has been running smoothly. According to Wind statistics, as of the end of June, the cumulative net inflow of northbound funds through Shanghai-Shenzhen-Hong Kong Stock Connect exceeded 1.7 trillion yuan, and the net inflow of southbound funds was nearly 2.06 trillion yuan.
During this period, the interconnection has undergone several “expansion”. On December 5, 2016, the Shenzhen-Hong Kong Stock Connect was officially launched, forming a “fighting” trend with the Shanghai-Hong Kong Stock Connect. On February 1, 2021, eligible stocks on the Science and Technology Innovation Board will be included in the scope of Shanghai-Shenzhen-Hong Kong Stock Connect. On June 1 of the same year, the Shanghai Stock Exchange and the Hong Kong Stock Exchange simultaneously ushered in the listing and trading of the first pair of mutual-linked ETF products.
The industry believes that the inclusion of the ETF into the interconnection mechanism will help the mainland and Hong Kong markets to further integrate and expand the breadth and depth of the market.
Zhou Ronghua, director of the China Guang Capital Research Institute, believes that compared with stocks, ETFs have the advantages of less investment risk, higher transparency, and lower costs. The inclusion of ETFs in the interconnection mechanism can provide Mainland investors with more diversified and more convenient investment channels for cross-border asset allocation, and for Hong Kong and overseas investors to share the operating results of high-quality listed companies in the Mainland.
Yang Delong, chief economist of Qianhai Open Source Fund, said that the inclusion of ETFs in the interconnection mechanism has greatly facilitated Hong Kong and overseas investors to purchase qualified ETFs on the Shanghai and Shenzhen exchanges, and is expected to introduce large-scale incremental funds for A shares. In the future, the interconnection mechanism is expected to continue to be optimized. While facilitating cross-border investment by investors, it will attract more “source of living water” to the mainland and Hong Kong markets.
“In the first half of this year, the mainland and Hong Kong markets ‘lead’ in global IPOs. Under the registration system, more and more high-quality science and technology companies have landed on A-shares, attracting Hong Kong and overseas investors. Mainland investors also have the demand to allocate high-quality targets in Hong Kong stocks. ” said Liu Guohua, managing partner of Ernst & Young Greater China Financial and Accounting Consulting Services, that the continuous “expansion” of the interconnection mechanism through the inclusion of ETFs is a “win-win” for the mainland and Hong Kong capital markets.
At the opening ceremony for the inclusion of ETFs on the Internet on the 4th, Cai Jianchun, general manager of the Shanghai Stock Exchange, said that this is another major measure to deepen cooperation between the capital markets of the two places and to further implement a high level of opening-up since the opening of the Internet.
Bosera Fund believes that in the medium and long term, the inclusion of ETFs will help improve the variety of interconnection and promote the mutual integration of the mainland and Hong Kong markets, which has far-reaching significance for the further promotion of cross-border two-way opening of the capital market.