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China okays HK-listed mainland ETF

07-06-2012 10:19 BJT

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After almost five years of preparations since the exchange-traded funds or ETF proposal was first initiated in 2007 in China, the Hang Seng's ETF and Feeder Fund has recently got the approval from China's securities regulator to be launched on the Shanghai and Shenzhen stock exchanges next Monday, or July 9th.

That marks a new era that mainland investors can finally invest directly in H-share in Hong Kong.

ETFs are investment funds traded on stock exchanges. The Hang Seng’s ETF and the Feeder Fund are using Hong Kong’s Hang Seng index. The launch of the two funds will allow Chinese mainland investors to share the profits from the Hong Kong market through buying Hong Kong stocks and Red Chips, which cannot be bought in the A-share market.

Hu Lifeng, general manager of Fund Research Center, China Galaxy Securities, said, "Currently, the valuation of the Hang Seng index is a little cheaper than the CSI300 Index. And the annual bonus rate is very high in the listed companies in Hong Kong, especially some big ones. These factors provide good choices to mainland investors who chase long-term investment and bonuses."

Investors can buy the funds with their accounts either in stock exchanges or banks. And for those who want to buy funds with U.S. dollars, the Hang Seng ETF accepts both RMB and U.S. dollars. But analysts warn that as the Hang Seng ETF is a cross-border trading, there’re risks of exchange rate fluctuations.

Chu Xiaofei, general manager of Investment & research Department, China AMC, said, "Investors buy the funds with RMB, but when fund companies invest their money in Hong Kong’s market, they have to exchange the RMB into Hong Kong Dollars. When investors buy back, fund companies need to sell the stocks in Hong Kong. And to return to investors, the money need to be exchanged to RMB again. In this way, there’re risks in exchange rates."

Analysts predict that the two funds are expected to offer value of at least 3 billion yuan, or 470 million U.S. dollars each so that they can be eligible for margin purchases and short selling.

 

Editor:Zhang Rui |Source: CNTV.CN

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