HKEX adds ETFs to Stock Connect with Mainland China

Rick Steves

Preparations are expected to take approximately six months to complete before ETFs become available on the Stock Connect.

china

Hong Kong Exchanges and Clearing Limited (HKEX) has announced the addition of ETFs to the Stock Connect as part of its commitment to continue expanding and enhancing the landmark mutual market access programme between the capital markets of Mainland China and Hong Kong.

HKEX reached an agreement with Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE) and China Securities Depository and Clearing Corporation (CSDC) to include eligible ETFs on the platform following a previous joint deal by the Securities and Futures Commission (SFC) and China Securities Regulatory Commission (CSRC).

ETFs in Hong Kong and Mainland China

HKEX and the exchanges in Mainland China are looking to open up their markets and provide investors with more options by broadening the existing Connect product ecosystem as well as supporting the continued development of both markets.

Adding eligible ETFs into Stock Connect will support the healthy development of ETFs in both the Hong Kong and Mainland China markets by expanding their investor base.

Next, HKEX, SSE, SZSE and CSDC will work closely on the details of inclusion, including business and technical preparations such as amendments to relevant rules.

The many exchanges have still to work on details of the inclusion of eligible ETFs. Preparations are expected to take approximately six months to complete before ETFs become available on the Stock Connect.

Nicolas Aguzin, HKEX Chief Executive Officer, said: “The addition of ETFs to the Connect franchise is a new and exciting milestone in the highly successful mutual market access programme between Hong Kong and Mainland China’s capital markets. This reflects Hong Kong and HKEX’s pivotal role as Asia’s international financial centre of choice, and we are delighted to be adding more diversified products to the existing Stock Connect and Bond Connect platforms.”

“This agreement underscores our close partnership with our Mainland stock exchange and clearing partners, and will give global investors direct, efficient access to Hong Kong and Mainland China’s rapidly developing ETF markets. This in turn will bring greater choice, liquidity and opportunity to Hong Kong’s markets”, Aguzin added.

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Stock Connect opens the doors to Mainland China

Stock Connect is a platform designed to allow international and Mainland Chinese investors to trade securities in each other’s markets through the trading and clearing facilities of their home exchange.

Under the programme, Hong Kong and overseas investors can trade Shanghai and Shenzhen listed stocks (northbound trading, Shanghai A share – Shanghai Connect or Shenzhen A share – Shenzhen Connect). In return, Mainland Chinese investors can trade Hong Kong-listed stocks (southbound trading, or Hong Kong Connect).

This comes as an opportunity for international market participants to gain exposure to Mainland China and its fast-growing emerging economy.

The program covers a wide range of SSE and SZSE A shares, which allows for diversification as well as opportunities to invest with RMB without the need to hold an account on Mainland China. HKEx subsidiaries are responsible for trading, clearing, and settlement. All fund transfers are in Hong Kong.

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