First ETF from HK to list in Taiwan

PUBLISHED : Friday, 24 July, 2009, 12:00am
UPDATED : Friday, 24 July, 2009, 12:00am

Hong Kong will have its first exchange-traded fund (ETF) cross-listed in Taiwan next week, marking a major step towards liberalising cross-strait securities investments.

Asset management firm BOCI-Prudential is making the first foray into Taiwan's ETF market by listing its WISE CSI 300 China Tracker on the island's stock market.

The move comes after Taiwan's financial regulator gave the go-ahead for Hong Kong ETFs to trade in Taipei two months ago as part of a broader agreement to strengthen cross-strait relations.

Under the arrangement, a feeder fund to enable a special kind of indirect listing will be raised in Taiwan and then reinvested in the WISE CSI 300.

This method avoids a cross-border listing, which could involve currency and tax clearing issues.

Polaris International Securities, the largest ETF provider in Taiwan, will be the fund's issuer in Taiwan.

The WISE CSI 300, listed in Hong Kong since 2007, tracks the performance of 300 major A-share companies.

The cross-listing will allow Taiwan investors to trade mainland stocks and is set to open the floodgates for overseas securities investment on the island.

'It is a milestone in efforts to achieve deeper co-operation between the mainland and Taiwan stock markets,' said Tang Hing-sing, an investment director at BOCI-Prudential Asset Management.

'The link with Hong Kong will lay down a cross-listing framework for subsequent liberalisation from the mainland in the future.'

At present, Taiwan investors can invest in the Hong Kong stock market by opening a local brokerage account, but like their Hong Kong counterparts, they are restricted from directly investing in mainland equities due to the nation's curbs on the capital account.

Under the latest addition to the closer economic partnership arrangement signed in May, Beijing is also exploring the introduction of ETFs with exposure to Hong Kong-listed stocks trading on the Shanghai stock market.

Alexa Lam, executive director and deputy chief executive of the Securities and Futures Commission, said there were about 15 ETFs in Hong Kong eligible to apply for cross-listing on the Taiwan stock exchange.