Author: Roman
On May 27, the China Securities Regulatory Commission and the Hong Kong Securities Regulatory Commission agreed in principle to include eligible exchange-traded funds (exchange-traded funds) (ETFs) in China Connect. Hong Kong investors can buy and sell stocks and ETF fund shares listed on the other exchange within the specified scope through local securities companies or brokers. Based on the principles of fund size and index-tracking stock selection based on interconnected underlying stocks, the two will determine eligible Mainland ETFs and Hong Kong ETFs to be included in the target scope.
It is reported that on December 24 last year, the three exchanges in Shanghai, Shenzhen and Hong Kong reached a consensus on the overall plan for ETFs to be included in the interconnection target, in order to further expand and improve the interconnection mechanism between Hong Kong and mainland capital markets.
ETFs have become eligible securities for interconnection, marking a new milestone in the interconnection between China and Hong Kong markets. It will further consolidate Hong Kong’s role as a “super-connector” between China and the international market, helping to facilitate east-west capital flows.
It is worth mentioning that ETFs are a low-cost diversification tool favored by many investors. The inclusion of ETFs in the interconnection target will further expand the investor groups in the two markets, and is conducive to promoting the healthy development of the ETF markets in the two places.
Ou Guansheng, Chief Executive Officer of the Hong Kong Stock Exchange, said, “The inclusion of ETFs is a landmark achievement of the upgrade of the interconnection mechanism. The inclusion of ETFs in interconnection targets can meet the higher requirements of all parties in the market for interconnection and create a win-win situation for the mainland and Hong Kong markets. , to promote the sustainable development of the two markets.”
The Securities Times reporter was informed that the implementation of arrangements for ETFs to be included in the Shanghai-Shenzhen Stock Connect requires regulatory approvals from both places, and the detailed arrangements are still being confirmed. Eligible SSE-listed ETFs and SZSE-listed ETFs will become eligible securities for SSE and SZSE, and the official launch date will be announced later.
So the question is, what kind of ETFs are eligible securities? It will also be divided into northbound ETFs and southbound ETFs.
It is reported that Northbound ETFs eligible for inclusion in China Connect must meet the following conditions:
1. The relevant ETF must be denominated in RMB, and the average daily asset size in the last six months shall not be less than RMB 1.5 billion;
2. The relevant ETF has been listed for not less than six months;
3. The tracked underlying index has been released for one year;
4. Among the underlying indices to be tracked, the weight of stocks listed on Shanghai Stock Exchange and Shenzhen Stock Exchange shall not be less than 90%, and the weight of Shanghai Stock Connect and Shenzhen Stock Connect stocks shall not be less than 80%;
5. The tracked underlying index or compilation plan must meet any set of conditions, that is, the weight of a single constituent stock does not exceed 30%, the number of constituent stocks is no less than 30, the weight of a single constituent security does not exceed 15%, and the weight of the top five constituent securities The total share of the constituent stocks does not exceed 60%, and the average daily turnover of the constituent stocks with a total weight of more than 90% in the past year ranks in the top 80% of the stocks listed on the stock exchange where they are located.
After the Northbound ETF is included in the Shanghai Stock Connect and Shenzhen Stock Connect, it means that all Hong Kong and overseas investors (including institutional and individual investors) can trade. However, there are daily quota limits for ETF trading under Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. Eligible A-shares and ETFs under Shanghai-Hong Kong Stock Connect and Shenzhen Stock Connect will share the same daily quota for northbound trading.
That is, under the Shanghai-Hong Kong Stock Connect, namely the Shenzhen-Hong Kong Stock Connect, the daily quota for the northbound route is RMB 52 billion, and the daily quota for the southbound route is RMB 42 billion.
Similarly, if any of the following conditions are triggered in the subsequent periodic adjustment of eligible northbound ETFs, it will become a sell-only security and will be suspended from buying:
1. The average daily asset size of the relevant ETF in the past 6 months is less than RMB 1 billion
2. Among the underlying indices being tracked, the weight ratio of stocks listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange is less than 85%, or the weight ratio of SSE and SZSE stocks is less than 70%
3. The underlying index to be tracked and its compilation plan trigger any set of conditions, such as the weight of a single constituent exceeds 30%, the number of constituent stocks is less than 30, the weight of a single constituent exceeds 15%, or the total weight of the top five constituent securities more than 60%, etc.
Eligible southbound ETFs have the same conditions as northbound ETFs, except that they are denominated in Hong Kong dollars and mainly track the Hang Seng series of indices.
According to the reporter’s understanding, Hong Kong’s ETF market is developing rapidly, and the average daily turnover in 2021 will increase by 20% year-on-year. As Asia’s leading ETF hub, Hong Kong is the preferred ETF for Asian investors, especially those in Singapore, South Korea and Taiwan. investment center.
edit/isaac
This article is reprinted from: https://news.futunn.com/post/15966784?src=3&report_type=market&report_id=206824&futusource=news_headline_list
This site is for inclusion only, and the copyright belongs to the original author.