Source: Securities Times, Author: Roman
91 ETF symbols have been included in the mutual market connectivity, which officially takes effect today!
According to the official website of the Hong Kong Stock Exchange, the latest list of qualified ETFs for Shanghai-Hong Kong Stock Connect and Hong Kong Stock Connect has been announced based on the new inclusion criteria. Among them, 85 ETFs are newly included in the eligible stock targets of the Mainland-Hong Kong Stock Connect, and another 6 ETFs are newly included in the eligible stock targets of the Hong Kong Stock Connect, which officially take effect today.
As of now, the total number of tradable ETFs for the northbound and southbound markets has increased significantly to 16 and 225, respectively, compared with two years ago (HK Connect: 4, SH/SZ Connect: 83).
The ETF market connectivity has expanded again.
Since the inclusion of ETFs in the SH/SZ-HK Connect two years ago, the trading volume of the Hong Kong ETF market has steadily increased, with the average daily turnover increasing from HKD 9.8 billion in July 2022 to HKD 12 billion in June 2024. The HK Connect is one of the main reasons behind the outstanding performance of the Hong Kong ETF market, with the average daily turnover of ETFs under the HK Connect increasing from HKD 0.22 billion in July 2022 to HKD 1 billion in June 2024.
According to the latest announcement, 6 ETFs have been added to the southbound HK Connect. Following the expansion, the southbound HK Connect will have a total of 16 ETFs from 7 ETF issuers.
85 ETFs have been added to the northbound SH/SZ Connect, including 59 ETFs listed on the Shanghai Stock Exchange and 26 ETFs listed on the Shenzhen Stock Exchange. Specifically:
After the expansion, the number of ETF products has covered a wider range of indexes. According to statistics, the 85 newly added northbound ETFs come from 27 fund companies including E Fund Management Co., Ltd. and China Southern Asset Management Co., Ltd., covering various types such as broad-based, industry-themed, and strategic ETFs. Among them, 42 northbound ETFs track indexes previously not covered by mutual market connectivity, covering 36 new indexes and greatly enriching the mutual market connectivity index system of ETFs.
In these newly covered indexes, 24 are industry-themed indexes, most of which involve technology concepts, such as China Securities Cloud Computing and Big Data Theme Index tracked by Cloud Computing ETF (516510) and China Securities Science and Technology 50 Index tracked by Technology ETF (159807). In the view of industry insiders, this will not only help introduce incremental capital but also better enhance the function of the capital market in serving technological innovation, and further promote the development of new productive forces.
It is worth noting that the newly added 85 northbound ETFs have relatively small scales, with an average scale of 1 billion yuan as of the second quarter, while the average scale of the 141 northbound ETFs previously included exceeded 11 billion yuan.
This change is due to the adjustment of the ETF inclusion requirement in mutual market connectivity. In April of this year, the China Securities Regulatory Commission issued 5 measures for cooperation with Hong Kong's capital market, which proposed to relax the product qualification scope requirements for stock ETFs under the SH/SZ-HK Connect. Subsequently, the implementation measures for the SH/SZ-HK Connect were revised, relaxing the requirements for ETF scales, lowering the thresholds for inclusion and removal, and adjusting the proportion of weights for index constituent stocks belonging to the SH/SZ-HK Connect.
Pang Yaping, general manager of the Index Research Department of E Fund Management Co., Ltd., told Securities Times that after the expansion of mutual market connectivity, overseas investors can better invest in A shares in different types, such as broad-based, large industry sectors, hot sub-sectors and style strategies through ETFs, thereby improving the precision of A-share market layout and enhancing market activity.
ETF expansion meets global investment trends.
ETF mutual market connectivity has just celebrated its important moment of two years since its launch earlier this month. In the past two years, in addition to the continuous enrichment of symbol numbers, the trading activity of ETF mutual market connectivity has also significantly increased with steadily rising turnover.
Wind data shows that since the opening in July 2022, the monthly trading volume of mainland China ETFs has increased from the initial approximately RMB 0.4 billion to RMB 21.5 billion in June 2024, an increase of more than 50 times, with the cumulative total trading volume approaching RMB 250 billion. Meanwhile, the monthly trading volume of Hong Kong ETFs has also increased from HKD 3.9 billion in July 2022 to HKD 18.1 billion in June 2024.
Pang Yaping said that ETF mutual market connectivity can effectively promote the continuous deep integration of the capital markets of the two places, further optimize the structure of market investors, and promote the expansion and improvement of ETF ecosystems.
Hong Kong Exchanges and Clearing Limited believes that Mainland investors’ investment in the international market still has room for improvement, and the proportion of international investors’ investment in the Mainland market is also relatively low. Therefore, there is still a lot of room for Mainland investors to grow in cross-border investment allocation. For example, in 2023, the offshore investment portfolio of Mainland China accounts for only about 6% of the country’s gross domestic product, while the proportion in the United States is about 70%. The newly added ETF inclusion standards bring new opportunities to promote cross-border investment allocation and connect the Mainland with the world.
In addition, this ETF expansion also follows the global investment trend of gradually turning to the ETF market. Due to its low cost and convenient investment, global ETF assets reached 11.6 trillion US dollars in 2023, an increase of 25.6% from 2022.
"With the increasing investment demand in the mainland, Hong Kong, and globally, this expansion of the Shanghai-Hong Kong Stock Connect ETF is expected to provide new impetus for the development of the ETF market in the coming years. For the development of the Hong Kong market, this is also great news. Expanding the scope of the Shanghai-Hong Kong Stock Connect ETF will help to enhance the product diversity and liquidity of the Hong Kong ETF market, support the sustained development of Hong Kong as a leading ETF market in Asia, and help to consolidate Hong Kong's role as the main gateway for investment in the mainland," said HKEx.
Editor/Lambor