HK and Mainland China about to add ETFs to Stock Connect, no official date yet

Rick Steves

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.

china

The China Securities Regulatory Commission (CSRC) and Hong Kong’s Securities and Futures Commission (SFC) have announced the inclusion of Exchange Traded Funds (ETFs) in Stock Connect, a Mutual Market Access programme through which investors in the Mainland China and Hong Kong can trade and settle shares listed on the other market via the stock exchanges and clearing houses in their home market.

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 respective investor bases, who can count on ETFs as a cost-efficient investment option and a popular choice for diversification.

The inclusion of ETFs on Stock Connect, a landmark mutual market access programme between Hong Kong and Mainland China’s capital markets, was first announced on late December 2021. At the time, HKEX clarified it would take about six months to prepare for the product expansion, but the official launch date remains unknown.

Nicolas Aguzin, Chief Executive Officer at HKEX, said: “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. We look forward to working with our Mainland partners and the market as we continue to enhance our mutual market connectivity.”

HK and overseas investors can trade Shanghai and Shenzhen listed stocks

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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