The debut of Hong Kong share ETFs is drawing near as regulators, bourses and industry representatives from China's mainland and Hong Kong gathered in Hong Kong on May 13 for a seminar on cross-border products cooperation and development.
Cross-border ETFs may adopt "T+2" settlement.
Both capital markets in China's mainland and Hong Kong are facing hard-won development opportunities, and both the Shanghai Stock Exchange (SSE) and Hong Kong Exchanges & Clearing Ltd. (HKEx) bear the tasks and missions of better serving China's economic growth according to the newly released "12th Five-year" Plan. Moreover, the progression of RMB globalization is rejuvenating the two capital markets. Under this circumstance, the above two bourses must join hands to share the development opportunities, SSE President Zhang Yujun said.
"We have reached a consensus on the cross-listing of index products, and expect more cross-listed products including ETFs and closer cooperation in the future." Zhang added.
As to the regulations on dual listing of ETFs, Secretary K C Chan for Financial Services and the Treasury Bureau said that relevant regulations had been basically in place after the 6th and 7th supplementary agreements on CEPA were signed between China's mainland and Hong Kong. HKEx Chairman Ronald Arculli pointed out that thanks to the current high demand for ETFs and index products on the Asian market, the SSE and HKEx may make closer cooperation in ETFs, especially cross-listing of index products, in the days to come.
In terms of the launch timetable, SSE Vice President Liu Xiaodong said that cross-border ETFs are just a few months away. Director Zhao Xiaoping of the SSE Products Development Department unveiled that ETF would make its debut before the end of 2011 as no obstacle is seen at present. Considering the "T+2" settlement adopted for HK ETFs, the first cross-border ETFs will follow suit.
QDII foreign exchange quotas may be granted for cross-border ETFs.
According to Zhao, the SSE's 3rd "Ten-year" strategic development plan gives equal priority to fund market and blue-chip market. 2010 witnessed the explosive growth of 10 ETFs. This year, another 20 are on the waiting list. In 2012, 40 ETFs will be introduced to the public. Till the second half of 2013, the SSE will boast 100 ETFs. The pattern of single-market ETFs is about to get a breakthrough as the agreement on some key risk and settlement issues of cross-market products have been reached. So far, almost all major international index companies have entered into agreements with the SSE. Besides, the SSE is studying the possibility of listing cross-system gold ETFs.
It is learnt that the first cross-border ETFs must be products related to Hong Kong share index, and the current Hong Kong share ETFs under development of domestic fund companies include Hang Seng Index ETF and Chinese-funded private enterprise ETF. According to industry insiders, the issuance of cross-border ETFs by domestic fund companies will occupy their QDII foreign exchange quotas. However, the State Administration of Foreign Exchange has agreed to increase the quotas in case of vibrant trading and enthusiastic subscription after listing to avoid possible short squeeze.
FTSE Mondo Visione Exchanges Index:
Shanghai Stock Exchange To Introduce Cross-border ETFs This Year
Date 18/05/2011