ETF Daily News
ETF Offers First Direct Exposure To China Shares
July 02, 2012
Hong Kong’s market regulator approved a long-awaited Hong Kong-listed ETF sponsored by China Asset Management that will give investors direct access to shares listed on both the Shanghai and Shenzhen stock exchanges, according to an article in the Financial Times.
While foreign investors have had some access to mainland Chinese companies, it’s been indirect via derivatives-based exposure. Many consider derivatives-based exposure to be more complex and risky than investing in actual shares due to counterparty risk and collateral some banks have used to hold investors’ funds, FT said. That means the approval is breaking new ground.
Any investment in mainland China—the so-called A-Shares market—is subject to the Chinese government’s renminbi qualified foreign institutional investors (RQFII) program. The fund’s sponsor, China Investment Management’s Hong Kong unit, is said to have several billion renminbi worth of RQFII quota to dedicate to the new Hong Kong-listed ETF.
The new ETF, which sources familiar with the matter said is likely to launch in mid-July, is part of a broader effort by Chinese officials to liberalize the Chinese currency, as well as its banking and financial markets, the article said.
In sum, the efforts will help Hong Kong become the platform for financial institutions around the world to conduct business in China’s currency—the renminbi—the article said, citing the Hong Kong Monetary Association.
Among those initiatives are the approval of listing similar funds listed in Shanghai and Shenzhen that would invest in Hong Kong’s market, the article said.
Chinese officials also recently approved two ETFs that will trade in mainland China and track the biggest mainland China stocks that are listed on both the Shanghai and Shenzhen exchanges.
For the full story, visit FT.com.
Paul and Ugo discuss the rumors surrounding the SEC's new approach to passive ETFs and whether investors have learned any lessons from the recent moves in gold.See All