HK and Shanghai closer to ETF cross-trading
The Hong Kong and Shanghai stock exchanges have finalised plans for a cross-trading mechanism involving exchange-traded funds that will give investors in the city or the mainland access to both equity markets.
The bourses are awaiting the nod from Beijing before launching the ETFs, Secretary for Financial Services and the Treasury Chan Ka-keung told a press conference in Shanghai yesterday.
The groundbreaking move allows mainland investors to invest in Hong Kong stocks after the 'through-train' programme was aborted in 2007.
'Shanghai and Hong Kong have reached common ground,' Mr Chan said after he met Shanghai officials including vice-mayor Tu Guangshao. 'The mainland regulator is studying the plan before rolling out the finalised rules.'
Mr Chan said no timeframe had been set, but added that the Hong Kong exchange was ready to launch the cross-trading platform.
Under the new scheme, mainland investors can buy into ETFs that are based on Hong Kong shares, while the city's investors will be able to buy new derivative products that track the A-share market.
On the mainland, the ETFs would be sold to investors through the qualified domestic institutional investor programme, with designated asset managers running the funds tracking Hong Kong-listed stocks, said Fang Xinghai, the director-general of the Shanghai Financial Services Office.
Beijing first announced the through-train programme in August 2007 that would have allowed individual mainland investors to buy Hong Kong shares directly under a pilot scheme. However, it backed down from the plan amid concerns of unlimited capital outflow and volatility on the domestic exchanges.
The cross-trading of ETFs will give mainland investors wider access to Hong Kong shares. Mainland investors can buy overseas equity-based QDII funds, but few of them focus on Hong Kong stocks.
Beijing is expected to set a quota for the ETFs.
