Caixin
Aug 31, 2020 07:21 PM
FINANCE

Hong Kong and Shenzhen Bourses Widen Access to Each Other’s Investors With ETF Deal

What’s new: The China Securities Regulatory Commission (CSRC) and Hong Kong’s Securities and Futures Commission (SFC) have approved the first four exchange-traded funds (ETFs) to be listed in Shenzhen and Hong Kong under a new program, widening access for investors to put money into each other’s stock market.

The CSRC has approved two ETFs to be listed in Shenzhen, each of which will invest at least 90% of its assets in an SFC-authorized ETF currently listed in Hong Kong through the Qualified Domestic Institutional Investor (QDII) mechanism, it said (link in Chinese) on Friday. The QDII program, launched in 2006, allows Chinese mainland companies to invest in offshore securities.

The SFC also said in a statement on the same day that two ETFs it approved will each invest 90% or more of their total net asset value in a CSRC-approved ETF currently listed on the Shenzhen Stock Exchange through the Renminbi Qualified Foreign Institutional Investor (RQFII) program. Launched in 2011, China’s RQFII program allows overseas investors to buy mainland securities.

Caixin has learned from sources with knowledge of the matter that the two ETFs the CSRC approved are managed by Harvest Fund Management Co. Ltd. and Yinhua Fund Management Co. Ltd.

The two ETFs approved by the SFC are managed by Hang Seng Investment Management Ltd. and CSOP Asset Management Ltd., the sources said.

What’s the background: “The scheme is a testament to the deepening of cooperation between the Mainland and Hong Kong capital markets, and will provide Hong Kong and Mainland investors with more investment opportunities and product choices through access to each other’s market,” the SFC said in the statement.

The new arrangement comes as China aims to further open up its financial markets.

In May 2019, China and Japan approved six similar cross-border ETFs to make it easier for investors to access stock markets in both countries.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full Caixin article in Chinese, click here.

Related: In Depth: Progress and Pitfalls for Foreign Investors in China’s Capital Markets

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Marcus Ryder (marcusryder@caixin.com)

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