Hong Kong-China ETF Connect Initiative Runs Aground on “Technical Issues”

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Plans to launch an ETF Connect scheme between Hong Kong and mainland China have been put on hold indefinitely due to “technical issues” according to the recently appointed chairman of Hong Kong’s Securities and Futures Commission.

“The trading and settlement methods for ETF’s between Hong Kong, Shanghai and Shenzhen are all very different,” said commission chairman Tim Lui Tim-leung at his debut media briefing on Wednesday according to a report from the South China Morning Post.

“It will need a very long period of discussion to establish an infrastructure to build an ETF Connect…as such, we have decided to shift our focus to launch the ETF cross listings.

“We will, however, not abandon the idea to establish the ETF Connect, which remains on our agenda for longer term development.”

Regulators originally planned to launch a scheme to permit the trading of listed exchange traded funds between Hong Kong and mainland China in the second half of 2018, following the launch of stock connect schemes with Shanghai in 2014 and Shenzhen in 2016.

The cross listings that will be launched in lieu of a trade connect scheme will enable ETF’s in Hong Kong and mainland China to list on each others’ exchanges, via an approval process similar to that employed for the mutual fund recognition agreement between the two jurisdictions.

The SFC and the China Securities Regulatory Commission (CSRC) executed two years ago which allows approved Hong Kong funds to be sold in mainland China and vice verse.

 

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