Strong demand for Exchange-Traded Funds (ETF) in Asia underlines the region’s growing role as a global ETF hub. There has been more active collaboration on additional guidance and rulemaking between different exchanges and jurisdictions to encourage ETF creation and investment in the region.
Earlier this year, Singapore’s exchange signed a memorandum of understanding (MOU) to establish an ETF link with the Shenzhen Stock Exchange (SZSE). This will allow eligible fund managers to offer ETFs in both markets and tap cross-border capital flows. However, the details are yet to be revealed.
Another new addition is the long-awaited “ETF Connect”, which finally arrived a few weeks ago. Subsequent to the announcement by the China Securities Regulatory Commission and the Securities and Futures Commission of Hong Kong. Such an arrangement offers mutual access to eligible ETFs by investors in mainland China and Hong Kong, providing more options to investors by expanding access to existing products in the ecosystem without having to buy underlying assets.
The addition of ETFs marks the second expansion of China’s stock connect schemes. The announcement comes a week after broadening the Shanghai-London Stock Connect scheme to include Shenzhen-listed companies, as well as capital markets in Germany and Switzerland.
These agreements will help facilitate cross-border investment by giving global investors more direct, efficient access to rapidly growing Asian markets. Such reforms also provide opportunities for international financial services firms to support investors and services across APAC. For those firms that already enjoy a presence in China and for those looking to enter the market this underlines the need for region and country-specific content. That is in addition to ensuring that corporate messaging is tailored to meet the needs of local customers.
