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The Stock Connect program, which allows investors in Hong Kong and mainland China to trade stocks across their markets, has experienced its most significant expansion since its launch in 2022.
Yesterday, 54 ETFs were added under the northbound Shanghai-Hong Kong Stock Connect, and 44 under the northbound Shenzhen-Hong Kong Stock Connect, increasing the total number of such products to 364, according to the Hong Kong Exchanges and Clearing. Additionally, seven ETFs were temporarily removed from the list.
Among the new inclusions, the much-anticipated ETF tracking the CSI A500 Index was introduced for the first time. This expansion also included popular thematic ETFs focused on sectors such as aerospace, satellites, high-end manufacturing, and artificial intelligence, further diversifying investment options.
This development enhances the range of investment tools available to international investors interested in China’s markets, enabling them to make more targeted and comprehensive investments. A representative from a joint venture between a Chinese securities firm and a U.S. global asset manager noted that the move is likely to attract more professional investors and increase capital inflows into China’s ETF market. Such growth is expected to bolster China’s financial markets’ global influence and competitiveness.
The new ETFs involve 29 Chinese fund managers. Leading institutions, such as China Asset Management with 14 newly eligible products and E Fund Management with 10, held a significant share, while Fullgoal Fund Management and China Universal Asset Management each had over five.
On the first day of this expansion, more than 60 percent of the ETFs saw gains, with the Huaxia Power Grid Equipment ETF leading with a 7.8 percent increase.
A research director at E Fund Management explained that the threshold for ETF inclusion in the Stock Connect has been lowered in recent years, which should foster further product innovation and diversification by asset managers across both markets. More ETFs reflecting the characteristics of both regions are anticipated to be added.
Expanding ETF access through the Stock Connect can also elevate the investment prospects for overseas institutional investors, improve the level of institutional investment in mainland China, and support the growth and development of the ETF market ecosystem, the director added.
Trading activity via the Stock Connect continues to rise. Last year, the amount of northbound funds flowing into China’s capital markets through this channel surged 76 percent to CNY 816.6 billion (USD 117.3 billion), more than six times the volume in 2022, according to Wind Information statistics.
Factors contributing to the program’s increasing popularity include supportive policy measures, improved mechanisms, better market liquidity, diverse investor demands, innovative products, and overall positive market sentiment. An industry expert stated that its core value lies in facilitating short-term capital flows, active trading, and fostering deeper integration of market rules, valuation standards, and investor structures between Hong Kong and mainland China.
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