ETFs are all approved, Beishui can buy Hong Kong stocks as soon as July

ETFs are all approved, Beishui can buy Hong Kong stocks as soon as July

A further step forward in the integration of the Hong Kong and mainland stock markets, the China Securities Regulatory Commission and the Hong Kong Securities Regulatory Commission jointly announced on Friday (27th) that they agreed to include ETFs (Exchange Traded Funds) in the interconnection mechanism, and the investment quota and stock interconnection will be counted and managed together . The SFCs of the two places estimate that it will take about two months from the announcement date to make final preparations, that is, the “ETF Connect” will be officially implemented as soon as July. Initially, Beishui’s ETFs will be available, with an asset size of at least 1.7 billion yuan, and they must invest in Hong Kong stocks and “Hong Kong Stock Connect” stocks.

The SFC announced that the institutional arrangement of the “ETF Connect” mainly refers to the “Shanghai-Shenzhen-Hong Kong Stock Connect” and follows the current fund operation, transaction settlement regulations and operation modes of the two places. After the implementation of “ETF Connect”, investors can buy ETFs in the two places across the border through local brokerages and brokers, but they can only participate in the secondary market and do not involve subscription and redemption.

Carrie Lam: Enhancing investor confidence in Hong Kong

Chief Executive Carrie Lam said that the implementation of ETF interconnection will further strengthen Hong Kong’s role as a bridge connecting domestic and foreign financial markets, and thanked the central government for its announcement on the occasion of the 25th anniversary of the establishment of the SAR, which will enhance investors’ confidence in the Hong Kong market.

Hong Kong Stock Exchange (00388) Chief Executive Officer Ou Guansheng said that the inclusion of ETFs as the subject of interconnection will more effectively meet the needs of all parties, and he looks forward to cooperating with mainland partners and other parties to promote the continuous upgrading of interconnection between the two markets.

The average daily asset scale is not less than 1.7 billion

The Hong Kong Stock Exchange also announced the eligibility criteria for ETFs to be included in the “Shanghai-Shenzhen-Hong Kong Stock Connect” subject. The criteria are still subject to regulatory approval, and the initial list of eligible ETFs will be announced later. According to the preliminary criteria, ETFs eligible for the “Southbound Connect” subject under “ETF Connect” must be denominated in Hong Kong dollars, with an average daily asset size of at least 1.7 billion yuan in the past six months, and the tracked index has been released for one year. Listed for more than 6 months; synthetic, leveraged and inverse ETFs are not eligible.

Under the preliminary requirements of the framework, eligible ETFs must mainly invest in Hong Kong stocks, and in the index they track, the weight of stocks listed on the Stock Exchange must account for at least 90%, and include secondary listed stocks that Beishui has not yet been able to invest in. In other words, mainland investors were not allowed to buy Alibaba (09988), JD.com (09618) and other secondary listed stocks through “Hong Kong Stock Connect”. They may invest in “ETF Connect” in the future, but they still need to wait for the mainland exchange to announce the specific list. prevail.

In addition, if the ETF tracks the HSI, HSCEI, KSI and the Hang Seng Hong Kong-listed Biotech Index, the weight of the “Hong Kong Stock Connect” stocks must be at least 70%, and the lower limit of the relevant weight of other indices is 80%.

If the ETF is a broad-based stock index, the weight of a single constituent stock cannot exceed 30%; for a non-broad-based stock index, there are at least 30 constituent stocks, the single constituent stock weight of which does not exceed 15%, and the total weight of the five constituent stocks does not exceed 30%. 60%.

It is worth mentioning that if the eligible ETF does not meet any of the above inclusion criteria and reaches a certain threshold (for example, the average daily asset scale in the last 6 months is less than 1.2 billion yuan, the tracking If the weight of stocks listed on the stock exchange in the index is less than 85%, etc.), they can only be sold, not bought.

Foundations seek to broaden asset classes

Huang Wang Ciming, CEO of the Investment Funds Association, believes that the initial framework of the “ETF Connect” is more prudent, which will help protect individual investors. He hopes that under the “Southbound Connect” project in the future, ETF investment regions and asset classes will be expanded to allow mainland investment Investors can buy overseas stocks, bonds and mixed asset ETFs in Hong Kong through “ETF Connect” to achieve risk diversification and allocation goals.

In addition, in terms of northbound trading of “ETF Connect”, the average daily asset size of eligible ETFs in the past 6 months is at least RMB 1.5 billion, and the weight of stocks listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange in the tracked indexes is not less than 90%, and ” The lower limit of the share weight of the Shanghai-Shenzhen Stock Connect is 80%, etc.

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