Hong Kong and China financial regulators have released a list of 87 exchange-traded funds that are eligible for the ETF Connect, which is scheduled to be launched on July 4.
There are only four funds given the greenlight for the southbound channel, referring to Hong Kong ETFs that are open to investors from China.
They are CSOP Hang Seng TECH Index ETF, iShares Hang Seng TECH ETF, Hang Seng China Enterprises Index ETF, and Tracker Fund of Hong Kong.
The number of Shanghai and Shenzhen listed funds open to investors from Hong Kong, or the northbound channel, is far longer: 83.
The launch date and eligible funds were announced by Hong Kong’s Securities and Futures Commission and the China Securities Regulatory Commission on June 28.
The ETF Connect aims to “expand the variety of traded products and provide more investment opportunities and convenience for domestic and overseas investors”, they say in a joint statement.
The northbound list is likely much longer because China’s ETF market is far larger than Hong Kong’s, so there are more funds that meet the asset size requirements, according to a fund manager based in Hong Kong. He expects the list of eligible funds to be expanded at a later date.
Guidelines released by the regulators on May 27 stipulate that southbound ETFs must have average daily assets under management of HK$1.7 billion (US$217.9 million) over the past six months. The average for northbound funds is 1.5 billion RMB ($224.9 million).
“Hong Kong and Mainland exchanges will review the programme every six months. We believe they will gradually include more funds, especially for those tracking international benchmarks, or even lower the asset threshold,” the fund manager tells Asia Asset Management, speaking on condition of anonymity.
Figures from the Asset management Association of China show that the onshore ETF market has $220 billion of assets under management. Meanwhile, figures from the Hong Kong bourse peg ETF market capitalisation in the city at HK$430 billion.
The ETF Connect is an extension of the eight-year-old Stock Connect. There is also a Bond Connect, launched five years ago.
Ashley Alder, chief executive officer of the Hong Kong regulator, describes the ETF Connect as an “important milestone” because it expands the scope of investment beyond stocks.
“It will catalyse Hong Kong’s growth as an ETF hub and underscore Hong Kong’s unique role connecting global capital with the Mainland,” he says in the statement.
