By Leo Zhang
Chinese securities regulators have approved the first batch of cross-border exchange-traded funds in both the mainland and Hong Kong, in the latest move to open the nation capital account and push forward the internationalization of the yuan.
Under licensing by Hang Seng Indexes Co, China Asset Management Co, one of the key mainland fund houses, started last week to sell units in a fund that will be linked to the Hang Seng Index and listed on the Shenzhen Stock Exchange.
Meanwhile, E Fund Management Co, another bellwether mainland fund company, has won the green light to issue a product that will be linked to the Hang Seng China Enterprises Index and will be traded on the Shanghai Stock Exchange.
The two funds, which gained the approval from the China Securities Regulatory Commission late last month, will be on sale to mainland investors through August 3, according to the fund companies.
On the other side, Hong Kong Securities and Futures Commission in late June also authorized the listing of a yuan-denominated A-share ETF on the Hong Kong stock exchange. The ETF is issued by China Asset Management (Hong Kong) to track the CSI 300 Index, which covers the biggest 300 companies listed in Shanghai and Shenzhen.
The ETF, which was listed in Hong Kong this week, is under the Renminbi Qualified Foreign Institutional Investor (RQFII) program, which allows Hong Kong units of Chinese financial firms to raise yuan proceeds in the city and invest in the mainland capital markets.
The deregulation came as Chinese President Hu Jintao visited Hong Kong to mark the 15th anniversary of its return to Chinese rule. Vice Premier Li Keqiang first announced the ETF initiative last August, after the government scrapped a plan to allow Chinese nationals to buy equities directly. The so-called hrough-train program for direct purchases, unveiled by regulators in August 2007, had helped push the Hang Seng Index to a record high in October that year.
The ETFs are) a positive step for cross-border capital flows, said Stephen Qian, a trader with West China Securities Co. he short-term impact on both markets may not be big due to a limited number of participants. But the significance is that a new channel has been created for yuan capital to flow between the mainland and Hong Kong. /p>
Hong Kong stock ETFs provide an alternative channel for mainland investors to participate in the Hong Kong securities market and further strengthen the co-operation between the mainland and Hong Kong capital markets, SFC Chairman Eddy Fong said in a statement in late June.
In the same statement, Alexa Lam, the SFC Deputy Chief Executive Officer and Executive Director of Policy, China and Investment Products, said that QFII A-share ETFs broaden the range of renminbi investment products in Hong Kong, offering Hong Kong investors an alternative channel to invest in the A-share market. /p>
