Singapore to establish ETF link with Shenzhen, joining Hong Kong, London in tie-ups with Chinese exchanges
- The new scheme comes as Singapore and China mark more than three decades of diplomatic ties
- The partnership follows Beijing’s announcement that it would allow ETFs to be traded in Hong Kong’s stock connect schemes with Shenzhen and Shanghai
The bourse operators of Singapore and Shenzhen have agreed to establish an exchange-traded fund (ETF) link, making the Lion City the third major market with a cross-border trading scheme with mainland stock exchanges after Hong Kong and London.
The two bourses announced their tie-up on Tuesday, a day before Singapore and China mark more than three decades of diplomatic ties at the 17th China-Singapore Joint Council for Bilateral Cooperation Meeting, co-chaired by Chinese Vice-Premier Han Zheng and Singapore’s Deputy Prime Minister Heng Swee Keat via video link.
“[The ETF link] will further deepen China-Singapore capital market product cooperation and accumulate experience for cross-border product connectivity enhancement,” the Shenzhen Stock Exchange said in a statement.
Under the memorandum of understanding, the two bourses will jointly promote ETF markets in Singapore and China through the listing of feeder ETFs, which link locally listed ETFs to those on the other exchange, according to the Singapore Exchange. The two bourses did not provide a timeline for the launch.
The agreement will “promote cross-border product innovation and connectivity, and provide investors in China and Singapore with diversified, cross-border investment opportunities,” said Sha Yan, president and chief executive of the Shenzhen Stock Exchange.
Loh Boon Chye, chief executive of the Singapore Exchange, said the agreement marks the country’s “commitment in supporting China’s internationalisation efforts”.
“The strong demand for ETFs in Asia underscores the region’s growing role as a global ETF hub, and we are excited about the manifold opportunities that this partnership could bring,” Loh said
Singapore-listed ETFs had more than S$12 billion (US$8.86 billion) in assets as of November, up 50 per cent from a year earlier. The Shenzhen Stock Exchange now has 212 ETFs with a combined market capitalisation of US$39 billion.
The agreement followed Beijing’s announcement on Christmas Eve that it would allow the addition of ETFs into Hong Kong’s stock connect schemes with Shenzhen and Shanghai within six months.
Over 143 ETFs are currently listed on the Hong Kong stock exchange, with a combined market cap of about HK$400 billion (US$51.4 billion). Their average daily turnover in the first nine months of 2021 was HK$6.7 billion, up 31 per cent from a year earlier, according to data provided by the exchange.
Since 2014, Hong Kong has linked up with mainland markets through cross-border schemes, including two stock-trading links, a bond-trading link, and the Wealth Management Connect, which allows individuals in the Greater Bay Area to trade investment products.
Starting in June 2019, the Shanghai-London Stock Connect has made select mainland stocks such as Huatai Securities Co available to British investors.