Across The Border | Hong Kong exchange traded funds expected to be popular among mainland investors
Some of the benchmark-tracking investment products, known as ETFs, will become available to mainland investors under the stock connect scheme in 2017
Mainland Chinese investors may bring new life to Hong Kong’s non-China-related Exchange Traded Funds (ETFs) after the products are included in the stock connect schemes next year, thanks to rising investor demand for asset diversification.
That may change the landscape of the Hong Kong ETF market currently dominated by A-share-related products in terms of turnover and product quantity.
In a note announcing the arrangement for Shenzhen Hong Kong Stock Connect, Hong Kong Exchanges and Clearing said that ETFs would be included in both the Shanghai and Shenzhen stock connect schemes, with the roll out planned in 2017. Few details were provided.
One or two years of tracking records will be a good indication for investors, although that will eliminate lots of products as well
“Everyone is excited. We see providers coming to launch more non-China ETFs. The industry is gearing up for the connect,” Clarence Chan, head of ETF & beta investments in Hong Kong, BMO Global Asset Management, told the Post.
ETFs are passively managed and open-ended funds that are traded like stocks on the stock exchange. They are designed to track the performance of benchmarks, like gold or stock indexes, and have lower management fees than actively managed funds.
Mainland investors can gain direct access to domestic funds exposed to China, which makes A-share ETFs in Hong Kong less attractive. But ETFs that track other regions or asset classes, or those that can hedge against currency risks, will be unique for mainlanders, Chan said.