ETF Connect 2nd Anniversary:
Promote the continuous and in-depth integration and development of the capital markets of the two places, and promote the improvement of the ETF ecosystem
China Fund News reporter Zhang Yanbei
On 4 July 2022, ETF Connect was officially launched, opening a new chapter in the mutual access between the capital markets of the Mainland and Hong Kong.
Over the past two years, ETF Connect has become an important bridge connecting the capital markets of the Mainland and Hong Kong, not only broadening the investment channels for domestic and foreign investors, but also playing an important role in promoting the integrated development of the capital markets of the Mainland and Hong Kong, promoting the high-level opening up of the capital markets of the Mainland, and ensuring the stable and healthy development of the capital markets of the two places.
As one of the important market participants, major fund companies have actively participated in the construction of ETF Connect and made positive contributions to the prosperity of ETF Connect through product innovation, marketing and investor education.
ETF Connect has achieved remarkable results in promoting the integrated development of the capital markets of the two places
In the past two years, ETF Connect has effectively promoted the continuous and in-depth integration of the capital markets of the two places, further optimized the structure of market investors, and promoted the expansion and improvement of the ETF ecosystem.
First of all, the opening of ETF interconnection has effectively broadened the investment channels for domestic and foreign investors and improved the level of openness of the capital market. As Xu Zhiyan, Assistant General Manager, Senior Director of Index and Quantitative Investment Department and Fund Manager of Huaan Asset Management, pointed out, "ETF Connect has successfully established a trading bridge between the A-share and Hong Kong stock markets, providing a new and convenient channel for international investors to enter the A-share market, as well as a new way for domestic investors to invest in overseas markets." ”
Guotai Fund further introduced that for northbound ETFs, foreign investors can directly invest in mainland ETFs through Hong Kong Stock Connect. For southbound ETFs, it also provides mainland investors with the opportunity to invest in Hong Kong-listed ETFs through the Hong Kong Stock Connect.
Pang Yaping, General Manager of the Index Research Department of E Fund, said that since the launch of ETF Connect two years ago, the number of southbound and northbound ETFs included in the Stock Connect has reached more than 150. The turnover increased steadily, with the total value of northbound trading increasing from RMB396 million in July 2022 to RMB21.367 billion in May this year, reflecting the strong demand from overseas funds to allocate A-share assets through ETFs.
"In the past, the way of investing in China was mainly through individual stocks, which required foreign investors to set up corresponding investment research teams to track domestic stocks, which was often relatively costly, and there were large non-systematic risks in individual stocks." Wang Lele, investment director of Wells Fargo Fund ETF, said, "As an exchange-traded fund, ETFs can avoid the non-systematic risks of a single stock, and have gradually begun to be recognized by foreign investors. ”
According to the data of the Hong Kong Stock Exchange, after the launch of ETF Connect, the cumulative trading amount of both northbound and southbound transactions has achieved significant growth. In the first five months of this year, the cumulative northbound trading volume increased by nearly 17 times compared with the first five months of ETF Connect, and the cumulative southbound trading volume also increased by 79% during the same period. In this regard, Tan Hongxiang, deputy director of the index investment department of Huatai Pinebridge Fund, said, "This data shows that compared with the familiarity of mainland investors with ETFs in the Hong Kong market, Hong Kong investors were relatively unfamiliar with mainland ETF products at first, but quickly adapted to and accepted this new investment channel." ”
In addition, ETF Connect will help promote the medium- to long-term development of the capital markets of the two places. Regarding the A-share market, Xu Zhiyan pointed out, "At present, more than 140 domestic ETFs have entered the Stock Connect list, and ETF Connect has accelerated the further opening of the domestic capital market and enhanced the international influence of the A-share market. The inflow of foreign funds has brought more liquidity support to A-shares, which is conducive to boosting the long-term stable development of the A-share market. ”
For the Hong Kong stock market, CSOP believes that ETF Connect will further enhance the attractiveness of the Hong Kong stock market to mainland investors, and this mechanism will bring more incremental funds from the mainland to the Hong Kong stock market, expand the scale of the Hong Kong stock market, enhance market trading activity, and attract more enterprises to list in Hong Kong.
It is worth mentioning that the development of ETF Connect has also played a positive role in promoting the ETF market itself. "On the one hand, ETF Connect has increased market liquidity and enhanced ETF trading activity. On the other hand, the investor structure of ETFs has been further diversified. ETF Connect has introduced more long-term funds to the domestic ETF market, which is conducive to enhancing the stability of the ETF market. In order to attract more cross-border investors, both markets are actively promoting ETF product innovation, which has enhanced the competitiveness and international influence of the ETF market. Xu Zhiyan said.
Tan Hongxiang also said, "The significance of ETF Connect is to create a far more convenient ETF investment channel for bilateral investors than QDII and QFII, making it a 'window' for ETF cross-market display, so as to better break through the 'blockage' between product supply and capital demand, open a breakthrough for subsequent mainland ETF products to go global, and also lay the foundation for a more comprehensive and in-depth high-level institutional opening of the mainland ETF market." ”
Actively participate in multiple initiatives of fund companies to promote the construction of ETFs
In the development of ETF Connect, major fund companies have actively participated in the development of ETF Connect, made important contributions to the development of ETF Connect, and made remarkable achievements in product innovation, investor education and market promotion.
"E Fund has always attached great importance to the business development opportunities brought about by ETF Connect, and strives to promote more products to be included in the Stock Connect to provide more choices for foreign investors." Pang Yaping introduced that since 2023, the company's 8 ETFs have been newly included in the Stock Connect, ranking first in the whole market. On the basis of ensuring the smooth operation of products, the company continues to strengthen refined management, continuously improve investment management and risk monitoring systems, and ensure product safety, efficiency and low-cost operation. The company has also set up a solution service team to help domestic and foreign investors better invest in the A-share market with the help of indexation tools.
Guotai Fund has set its sights on overseas institutional investors, actively explored investment and education channels for overseas investors, and expanded the introduction and companionship of overseas investors through various ways. This approach has effectively increased the recognition of A-share ETFs by overseas investors and injected new impetus into the development of ETF Connect.
"In the past two years, Huatai Pinebridge has played an important role in both the 'import' and 'export' directions of ETF Connect. On the 'import' side, the company's leading products such as CSI 300 ETF and dividend ETF have been focused on and held by northbound funds after they are included in ETF Connect. On the 'export side', the company is deeply involved in the trading of some ETF products in the Hong Kong stock market, which has made an important contribution to the liquidity and scale growth of the ETF market under the Southbound Scheme. Tan Hongxiang introduced.
Wang Lele said, "Judging from the data of the interconnection, overseas investors have been investing in domestic ETFs in recent years, especially some assets with high scarcity, such as military leading ETFs, tourism ETFs, etc., as well as areas where it is difficult for foreign investors to cover individual stocks, such as 1000 ETFs." ”
It is understood that since the launch of ETF Connect two years ago, CSOP has actively participated in the ETF Connect project, and two products have been included in the Southbound ETF Connect. Among them, the amount of CSOP Hang Seng TECH Index ETF held through ETF Connect has recently reached a new high. In addition, CSOP has also actively participated in the publicity, roadshow and investor education of domestic and overseas connectivity, providing strong support for investors to better apply this category of products.
Huaan Fund has also made certain achievements in the development of ETF Connect. "The company's ChiNext 50 ETF and SSE 180 ETF are the targets of ETF Connect. In the past two years, Huaan Fund has been actively engaged in investor education and marketing work, as well as retouching and translating product materials according to the characteristics of overseas customers. Relying on the Hong Kong market, we encourage overseas investors to actively allocate ETF tokens. Xu Zhiyan introduced.
In promoting the development of ETF Connect, Penghua Fund has also spared no effort. They not only cover broad-based, industry-based, and thematic ETFs in terms of product layout, but also actively carry out investment education activities to strengthen investment education for investors in third- and fourth-tier cities on the characteristics of ETF index instruments. These measures not only enhance the company's popularity and reputation in the Stock Connect ETF products, but also provide investors with more comprehensive and in-depth investment education services.
The second anniversary of ETF Connect: The number of products exceeded 150, and the trading popularity increased significantly
China Fund News reporter Lu Huijing
On 4 July, ETF Connect will celebrate its second anniversary.
In the past two years, ETF Connect has not only expanded the number of products, but also increased the trading value. Wind data shows that as of June 29, the number of ETFs included in the "Mainland-Hong Kong Stock Connect" reached 141, and the number of ETFs included in the "Hong Kong Stock Connect" increased to 10, an increase of 58 and 6 respectively compared with the beginning.
Since the beginning of this year, the trading volume of "ETF Connect" has also been significantly active. As of the end of May, the total turnover of the "Hong Kong Stock Connect" in May reached 21.367 billion yuan, an increase of nearly 53 times compared with the first month of opening in July 2022, and the "Hong Kong Stock Connect" continued to introduce fresh water, with a turnover of 35.262 billion Hong Kong dollars in May, an increase of more than 7 times compared with the first month of operation.
The number of ETF Connect products has exceeded 150
On July 4, 2022, the much-talked-about ETF Connect business officially set sail, and now it is about to celebrate its second birthday.
Wind data shows that in the past two years, with the continuous introduction of new products to the "ETF Connect", the number of products has reached 151, including 84 Shanghai-Hong Kong Stock Connect ETFs, 57 Shenzhen-Hong Kong Stock Connect ETFs, and 10 Hong Kong Stock Connect ETFs. This is an increase of 64 birds compared to two years ago.
Not only has the list been expanded many times, but the trading popularity and turnover of "ETF Connect" have also gradually increased. Judging from the situation in the first five months of this year, the activity of ETF Connect "northbound" has increased significantly. According to data from the Hong Kong Stock Exchange, as of the end of May, the total turnover of "northbound" reached 102.751 billion yuan, an increase of 2.81 times compared with the same period last year. Especially in February and March this year, the monthly turnover of "northbound" ETFs continued to exceed 20 billion yuan, hitting a record high. The April data fell back to around 19 billion yuan, and the May data stood above 20 billion yuan again.
From the perspective of "southbound", the turnover in the first five months was HK $149.477 billion, a slight decrease of 7.86% compared with the same period last year. However, the data in May increased significantly month-on-month, with the monthly turnover exceeding HK $35.2 billion, an increase of nearly 9% month-on-month.
If we look at the overall data since its launch, the trading volume of "southbound" and "northbound" ETF Connect is relatively large. The total turnover of "northbound" reached 226.782 billion yuan, while "southbound" reached 880.508 billion Hong Kong dollars.
The popularity of "ETF Connect" trading has increased
Talking about the reasons for the increase in the popularity of "ETF Connect", Tan Hongxiang, deputy director of the index investment department of Huatai Berry Fund, boiled it down to three points: first, the A-share and Hong Kong stock markets rebounded from around the Spring Festival to mid-May this year, investor confidence has been restored, and the market trading activity is relatively high; Second, on April 19, the China Securities Regulatory Commission (CSRC) issued five measures for capital market cooperation with Hong Kong, which mentioned "relaxing the scope of eligible products for stock ETFs under the Stock Connect", which boosted market expectations; Third, the Hong Kong dollar appreciated to a certain extent relative to the renminbi in May, which may have stimulated the demand for southbound investment by some mainland investors.
CSOP believes that the growth of "northbound" trading activity this year is due to the continuous volatility of the domestic stock market during the year, and foreign investors have conveniently allocated A-share broad-based indices and popular thematic ETFs at a low level through northbound ETF connect; The outbreak of "southbound" activity in May was due to the fact that Hong Kong stocks rose by more than 20% in a month at that time, attracting domestic funds to quickly and conveniently increase their positions in Hong Kong stock assets through Southbound ETF Connect to capture the phased gains.
According to Zhang Yuxiang, fund manager of the quantitative and derivatives investment department of Penghua Fund, "ETF Connect", as a new optional investment product for investors, needs to go through a process of gradual understanding and familiarization. After two years of development, both parties have an in-depth understanding of the interconnection products, which will also attract investors to allocate to a certain extent.
A number of products are expected to be included in the "ETF Connect" in July
In order to further optimize the Stock Connect mechanism, on June 14, the Shanghai and Shenzhen Stock Exchanges revised the implementation measures for Stock Connect to expand the scope of ETF connectivity, and the latest list will be released by the Shanghai, Shenzhen and Hong Kong exchanges on July 12. The industry also has high expectations for the expansion of ETF Connect.
Pang Yaping, general manager of the index research department of E Fund, calculated according to public data, that when the Stock Connect was expanded in July this year, 82 ETFs listed on the mainland may be expected to be included in the Stock Connect, of which 43 products track indices that were not previously covered by the Stock Connect ETFs; According to the current data, when the Hong Kong Stock Connect is expanded in November, it is expected that three Hong Kong-listed ETFs may be included in the Stock Connect, involving the Hang Seng Index and the Hong Kong Stock Dividend Index.
"With the expansion of the scope of Stock Connect ETFs, foreign investors can better use ETFs to invest in different types of A-share broad-based, broad-based industries, subdivided popular tracks and style strategies, so as to improve the sophistication of the layout of the A-share market and enhance market activity. At the same time, some of the ETF products that are expected to be included in the Cross-border Stock Connect involve the concept of science and technology, and the introduction of incremental funds will help better play the role of the capital market in serving scientific and technological innovation and promote the development of new quality productivity. Pang Yaping said.
"After the relaxation of the inclusion criteria for ETF Connect, in terms of Hong Kong stock ETFs, Hong Kong stock high-dividend ETFs, ESG ETFs and other thematic products are expected to be included; In addition, it is estimated that most of the A-share ETFs that are expected to be newly included are industry-themed funds, which are in line with China's long-term development themes (chips, cloud computing, photovoltaics, state-owned enterprises and dividends, etc.), and are also conducive to attracting overseas investors to refine the layout of A-share sub-sectors and popular tracks. CSOP expects that in the next two years, the size of Hong Kong Stock Connect ETFs is expected to increase by $5 billion to $10 billion.
Innovation activates the momentum of ETF communication
All walks of life work together to explore the future of the big space
China Fund News reporter Fang Li
In the past two years, ETF Connect has made steady progress and delivered a commendable report card.
In the future, the new journey of ETF Connect continues. Many of the interviewees actively offered suggestions and suggestions to further promote the sustainable development of ETF Connect by further expanding the scope of ETF Connect, optimising the trading and settlement mechanism, strengthening marketing and international cooperation, and actively promoting investment education, etc., to further promote the sustainable opening and healthy development of the capital markets of the two places.
Promote the development of ETF Connect in multiple dimensions
In terms of promoting the future development of "ETF Connect", many people have actively put forward suggestions and suggestions, and made efforts in multiple dimensions such as investment scope, cooperation model, publicity and education, etc., to explore the future space with innovation.
In this regard, Xu Zhiyan, assistant to the general manager of Huaan Fund, put forward three suggestions: first, further expand the product scope of ETF Connect to meet the diversified needs of different investors, and include ETFs including commodities, bonds, overseas and other types to broaden the investment scope of ETF Connect.
Second, we will optimize the trading and settlement mechanism, reduce the transaction costs of ETF Connect, improve trading efficiency, strengthen the alignment of rules between the two markets in terms of supervision, settlement and settlement, and simplify the trading process.
Third, strengthen marketing and international cooperation, explore the cooperation of ETF Connect in multiple overseas markets, attract overseas investors to participate in the A-share market, and enhance the international influence of the domestic ETF market.
As the first Hong Kong subsidiary in the fund industry, CSOP also has its own suggestion that the Stock Connect mechanism needs the joint efforts of policies and market participants to achieve long-term development.
The above-mentioned people proposed that on the policy side, relaxing the investment restrictions on the Stock Connect and including the products in the ETF Connect into the white list of insurance fund investment will attract more long-term funds; At the same time, the threshold for retail investors to participate in the ETF Connect will be lowered. In terms of market participants, asset management institutions are responsible for more market construction and investor education. We will continue to promote investor education in ETF Connect, and more and more investors will use ETFs as investment tools, and ETF Connect is expected to become an increasingly important investment channel. More specialized, differentiated ETFs that meet the requirements will be included in the Stock Connect list.
"At present, the development of ETF Connect has gradually been on the right track, and there is still room for further optimization in the future, which is that when the conditions are ripe, we can consider continuing to relax the scope of products that can be included in the Southbound Scheme, and include some ETF products that invest in the non-Hong Kong stock market. The inclusion of more overseas investment products under the framework of ETF Connect can take into account both returns and risks, and serve as a platform for communication and exchange in the process, so that mainland regulators, fund managers, sales agencies, investors and other parties can have a more comprehensive and in-depth understanding of the systems, rules and structures of multiple overseas markets, which is conducive to accelerating the pace of the mainland capital market towards a high-level institutional opening up. Tan Hongxiang, deputy director of the index investment department of Huatai Berry Fund, said.
Some people also suggested strengthening exchanges and cooperation with overseas organizations. Wang Lele, investment director of Wells Fargo Fund ETF, said that more promotion and exchange meetings for overseas investors can be held to enhance overseas investors' awareness of domestic ETFs.
ETF Connect will continue to be more active in the future, with a larger scale and more participants
When it comes to the future prospects of ETF Connect, many of the interviewees are optimistic that the future will become more active and continue to improve, the customer base and scale of ETF Connect will continue to expand, and the international influence of A-shares will be further enhanced.
"The average monthly turnover and stock size of ETF Connect have achieved rapid growth in the two years since its establishment, but in terms of absolute scale, the current average monthly southbound trading volume of 30 billion Hong Kong dollars and the southbound stock of less than 20 billion Hong Kong dollars are still far behind the trading scale and stock of Hong Kong Stock Connect, which also means that ETF Connect still has a very broad space for development." The above-mentioned CSOP related person said.
In the future, with the improvement of the operating mechanism and investor education, ETF Connect will have a richer product line, or will be able to invest in overseas stocks, bonds, REITs, and global commodity ETFs, which will further promote the development of ETF Connect while enriching the international allocation of mainland asset management.
Similarly, Wang Lele also said that from the perspective of overseas markets, investors' participation in ETFs continues to increase, and overseas investors' recognition of ETFs is relatively high. At present, foreign investors' participation in equity investment in the domestic market is mainly based on individual stocks, and in the future, with their awareness of domestic indices gradually improving, ETFs are expected to become an important growth point for foreign investors' allocation.
More importantly, many people believe that the continued development of ETF Connect will help enhance the international influence of A-shares.
Guotai Fund said that ETF Connect will tend to be active in the future and continue to improve. The scale and customer base of domestic ETF products will continue to expand. Stock Connect is conducive to the entry of medium- and long-term funds, and some ETFs listed on the mainland are expected to receive considerable inflows in the future, especially in sectors that are preferred by northbound funds and are scarce in the Hong Kong stock market, which will help enhance the international influence of A-shares.
Tan Hongxiang said more bluntly, in the past few years, we can see that with the acceleration of a new round of scientific and technological revolution and industrial transformation and the rise of the economic status of the "Global South", the competition for high-quality capital and long-term capital in the capital markets of various countries and regions has become increasingly fierce. The ETF market in the Mainland and Hong Kong has a high degree of differentiation in terms of product and investor structure, and strong complementarity in resource endowments, and closer connectivity is the only way to shape new momentum for development, which has a lot of room for growth in the long run.
Editor: Xiao Mo
Review: Muyu