Hong Kong investors to get greater choice of exchange-traded funds, as securities watchdog approves two Shenzhen-listed products

Hong Kong’s securities watchdog has approved the listing of two exchange-traded funds (ETFs) that will invest in ETFs listed on the mainland, as part of efforts to expand investors’ choices of financial products on both sides of the border.

The pair will each invest 90 per cent or more of their assets in an ETF approved by the China Securities Regulatory Commission, currently listed in the Shenzhen Stock Exchange and tradable by certain qualified foreign institutional investors.

The move coincided with the CSRC’s approval for two ETFs to be listed on Shenzhen’s bourse under the same scheme. They will each invest at least 90 per cent of their total net asset value in an SFC-authorised ETF already listed in Hong Kong, also tradable by some qualified mainland investors.

“The scheme is a testament to the deepening of cooperation between the mainland and Hong Kong capital markets, and will provide Hong Kong and mainland investors with more investment opportunities and product choices through access to each other’s market,” the SFC said in a statement on Friday.

The announcement comes as Hong Kong’s future as an international financial centre has been clouded by back-to-back tumultuous events – the anti-government protests last year and now the controversy over Beijing’s crafting and enactment of a national security law for Hong Kong.

Singapore, a long-time rival and a pillar of stability, is seen as benefiting from capital flowing out of Hong Kong.

The SFC in December last year issued a circular on streamlined approval requirements for ETFs adopting the so-called “master-feeder” structure, following requests to allow more flexibility in approving such products.

The request was aimed at facilitating more cost-effective development of ETF products, and offering more investment choices to investors.