Hong Kong stocks ETF through the introduction of detailed rules institutions expect A shares are expected to influx incremental funds
Financial Associated Press, June 27 (Editor Hu Jiarong) The my country Securities Regulatory Commission recently issued the “Announcement on the Arrangements for the Inclusion of Exchange-traded Open-end Funds in Interconnection” (hereinafter referred to as the “Announcement”) to further deepen the interconnection between the mainland and Hong Kong stock markets. The exchange mechanism will promote the common development of the capital markets of the two places. The “Announcement” will come into force on the date of its promulgation. The Shanghai and Shenzhen Stock Exchanges and China Clearing issued relevant rules and regulations.
Note: The relevant person in charge of the Shenzhen Stock Exchange and the Shanghai Stock Exchange announced by the China Securities Regulatory Commission pointed out that the implementation measures for the Shanghai-Shenzhen-Hong Kong Stock Connect business specify the specific arrangements for the inclusion of ETFs in the interconnection target. Include eligible SSE, SZ and SEHK stock ETFs into the scope of the Shenzhen-Hong Kong Stock Connect, as follows: SSE ETFs and SZSE ETFs have an average daily asset size of RMB 1.5 billion in the past six months, and their constituent securities are listed in Shenzhen-Shanghai ETFs. Stock Connect is mainly based on the underlying stocks.
At the same time, the average daily asset size of ETFs on the Hong Kong Stock Exchange in the past six months has reached 1.7 billion Hong Kong dollars, and its constituent securities are mainly the underlying stocks of Hong Kong Stock Connect, which cannot belong to synthetic ETFs, leveraged and inverse products. To be included in the underlying ETF, it must meet the requirements of listing for six months and the underlying index for one year. In principle, the underlying ETF is adjusted every six months.
In addition, the deadline for the first review of Shanghai-Hong Kong Stock Connect ETFs and Hong Kong Stock Connect ETFs under Shanghai-Hong Kong Stock Connect is April 29, 2022. The deadline for the first review of Shenzhen-Hong Kong Stock Connect ETFs and Hong Kong Stock Connect ETFs under Shenzhen-Hong Kong Stock Connect is April 29, 2022.Relevant regulations will come into effect on July 25, 2022. From the date of implementation, participants of the Stock Exchange shall not open new Shenzhen Stock Connect trading rights for mainland investors
Institutions applaud the launch of Hong Kong ETF Connect
For the interconnection of ETFs, the Hong Kong and A markets have benefited a lot. CICC released a research report saying that the inclusion of eligible ETFs is another landmark expansion event of the interconnection mechanism. Although the short-term direct impact may not be great, the medium and long-term impact will be far-reaching. CICC stated that this move is conducive to enriching investment products, especially for international long-term investors to make allocation-based investments in A-shares, which may have a greater impact on A-shares than Hong Kong stocks.
The non-bank financial research team of CSC also pointed out that since the launch of the interconnection mechanism, product categories have continued to expand, and “further expansion of interconnection” is one of the primary development strategies of the HKEx. The inclusion of ETFs will expand product categories and further promote the two-way opening of the capital market. The team also stated in the research report that with the maturing development of China’s capital market and the continuous entry of long-term funds, coupled with the expansion of the two-way opening of the capital market, the inclusion of ETFs in the interconnection will help to increase the penetration rate of China’s equity ETFs .
Tianfeng Securities pointed out that, on the one hand, the inclusion of ETFs in the interconnection target can enrich the investment channels and trading varieties of domestic and foreign investors, and help domestic and foreign investors to more effectively connect with each other’s market resources. On the other hand, the inclusion of ETF as the subject of interconnection will further improve the investor structure and help promote the healthy development of the ETF market.