On July 4, ETF was officially opened as part of the stock market interconnection mechanism between the mainland and Hong Kong, and capital from the mainland and Hong Kong went both ways to open a new bureau. In the future, investors from the two places will be able to invest in ETF on the interconnection list through the Shanghai-Shenzhen-Hong Kong Stock Connect.

1. What is ETF interconnection and what are the inclusion rules?

ETF generally refers to the exchange-traded open-end index fund, which is a kind of open-end fund with variable fund share and listed on the exchange. ETF is a collection of a package of stocks. Compared with a single stock, it has the characteristics of risk diversification, low management costs, low liquidity risk, higher transparency and more robust returns.

ETF Interconnection means that mainland investors can buy and sell ETF funds listed on the Hong Kong Stock Exchange through local securities firms, and Hong Kong investors can also buy and sell ETF funds listed on the Shanghai and Shenzhen stock exchanges through local securities firms or brokers.

According to the rules, on the basis of the existing Shanghai-Shenzhen-Hong Kong Stock Connect mechanism, the ETF of stocks in the mainland and Hong Kong markets that meet certain conditions this time can be included in the scope of interconnection.

The inclusion criteria are as follows:

Both the mainland market ETF and the Hong Kong market ETF have to meet the requirements of listing for six months and the underlying index has been released for one year. The average daily assets of ETF in the mainland market has reached 1.5 billion yuan in the past six months, and the constituent securities are mainly stocks of Shanghai and Shenzhen Stock Exchange.

The Hong Kong market ETF has an average daily assets of HK $1.7 billion over the past six months, and the constituent securities are mainly Hong Kong shares, excluding synthetic ETF, leverage and reverse products.

In principle, the ETF included in the target is adjusted every six months. In terms of trading mechanism, daily quota control, investor appropriateness management, regulatory cooperation, clearing and settlement and risk control arrangements, it is basically consistent with the existing stock mechanism of Shanghai, Shenzhen and Hong Kong Stock Connect, and is limited to secondary market trading.

II. Threshold for investors

For Hong Kong investors, the conditions for investing in Land Stock Link ETF are more relaxed, and both individual and institutional investors can participate.

For mainland investors, individual investors who invest in the Hong Kong Stock Connect ETF need to meet the condition that the total assets in the securities account and capital account are not less than RMB 500000.

three、The first batch to be included in the ETF list of interconnection.

According to the latest announcement from the Shanghai, Shenzhen and Hong Kong exchanges, a total of 87 joint ventures were included in the ETF Stock Connect, of which mainland investors can buy four Hong Kong shares ETF through southbound Shanghai-Hong Kong Stock Connect and southbound Shenzhen Stock Connect, while Hong Kong investors can buy 83 A-share ETF through northbound Shanghai-Shenzhen Stock Connect.

At present, the Shenzhen Stock Exchange and the Shanghai Stock Exchange have announced the list of the first batch of Hong Kong Stock Connect ETF that meet the inclusion criteria:

On the other hand, the Hong Kong Stock Exchange released the first batch of northbound qualified ETF, including 30 Shanghai Stock Connect ETF53 and Shenzhen Stock Connect ETF:

IV. The impact of the inclusion of ETF into interconnection

For international investors, mainland ETF, which is scarce in Hong Kong and overseas markets, can be invested through Lufentong, and they can pay attention to the inflows of some mainland-listed ETF, especially those sectors with northward capital preference.

For mainland investors, on the one hand, compared with the ETF funds that track Hong Kong stocks in the A-share market, Hong Kong stocks ETF can trade directly through interconnection in accordance with the trading rules of the Hong Kong stock market, which is not limited by the limit board system, and the trading time is also different, so it has more flexibility and convenience in trading.

On the other hand, investors can use the ETF selected by "northbound capital" as a reference to observe the A-share market, and they can also purchase Hong Kong stock ETF through "Hong Kong Stock Connect" to make supplementary allocation for investment, so as to bring more incremental funds to the relevant ETF, thus enhance the liquidity, diversity and activity of the ETF market, and promote the continuous expansion of the ETF market.

The inclusion of ETF into the connectivity mechanism will help promote capital flows between the East and the West. For the HKEx, the inclusion of ETF will attract more RMB capital precipitation, thereby consolidating Hong Kong's position as an offshore RMB financial management center and strengthening its role as an important hub of the West.