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Business

Thumbs-up for impending ETF Connect changes as bigger pool of choices, funds beckon investors

  • China’s CSRC will relax the eligibility criteria for the ETF Connect scheme, potentially doubling the pool of choices for stock investors
  • Global fund managers welcome the measures, while also calling for further steps to include other asset classes

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Investors will get a bigger pool of ETF funds to trade in ETF Connect scheme when easier eligibility criteria kick in later this year. Photo: Shutterstock
Enoch Yiu
China’s efforts to broaden the appeal of exchange-traded funds (ETFs) on the mainland and Hong Kong markets are getting thumbs-up from local and foreign players, who see a brighter outlook in product offerings and fund inflows.
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The measures, which lower the thresholds on size and portfolio constituents for the ETF Connect scheme, are likely to double the pool of ETFs tracking equity benchmarks in both financial markets, where trading volume has increased in recent months.

“The improvements are a step in the right direction to ensure its success going forward,” Tom Digby, head of ETF business development and capital markets for Asia-Pacific at Invesco, said at a conference hosted by the Hong Kong Investment Funds Association (HKIFA) on Thursday.

From Left: Sally Wong, CEO of Hong Kong Investment Funds Association; Andy Ng, head of iShares equity product strategy at BlackRock; Tom Digby, head of Asia-Pacific ETF business development & capital markets at Invesco; Rahul Bhalla, head of Asia ETF distribution at Franklin Templeton; and Alex Chiu, senior strategist of ETF Business at Value Partners. Photo: Enoch Yiu
From Left: Sally Wong, CEO of Hong Kong Investment Funds Association; Andy Ng, head of iShares equity product strategy at BlackRock; Tom Digby, head of Asia-Pacific ETF business development & capital markets at Invesco; Rahul Bhalla, head of Asia ETF distribution at Franklin Templeton; and Alex Chiu, senior strategist of ETF Business at Value Partners. Photo: Enoch Yiu

An ETF is an investment vehicle that works like a combination of mutual funds and stocks, typically tracking major indices by mirroring their components. Individual investors who buy and sell the ETFs are effectively buying stocks represented in the target index.

The China Securities Regulatory Commission (CSRC) last week unveiled five measures to help halt a market slump and revive confidence in the nation’s capital markets. The decision to tweak the ETF Connect eligibility criteria came following China’s market intervention when state-run funds pumped billions into the ETF vehicles to lift stock prices.

The CSRC will slash the minimum assets under management to HK$550 million (US$70 million) from HK$1.7 billion. ETF managers will be allowed to hold 60 per cent of their assets in Hong Kong or mainland-listed stocks, versus 90 per cent currently.

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