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Hong Kong’s securities regulator has relaxed guidelines on the sharing of analysis with buyers on mainland China-listed alternate traded funds that may be accessed by native buyers by way of the Inventory Join schemes.
The Hong Kong-China ETF Join was launched in July 2022 to supply buyers with mutual entry to eligible ETFs on mainland China and Hong Kong exchanges. However uptake has been hindered by strict laws stopping fund companies from selling their ETFs within the cross-border jurisdiction and limiting distributors from providing ETF product data to buyers.
Nevertheless, Hong Kong’s Securities and Futures Fee has moved in the direction of liberalising a few of these restrictions by issuing a round to intermediaries to set out the situations below which analysis studies on eligible ETFs within the ETF Join might be distributed to finish buyers.
The transfer is framed as a reciprocal association after the China Securities Regulatory Fee clarified that analysis studies of eligible Hong Kong ETFs below ETF Join might be forwarded by mainland securities firms to finish buyers with the intention to improve entry to data.
This text was beforehand revealed by Ignites Asia, a title owned by the FT Group.
The SFC round stated {that a} “related report wouldn’t be thought of an commercial or invitation”, which is at present prohibited by Hong Kong’s Securities and Futures Ordinance, topic to sure situations.
A analysis report should be issued by sure outlined licensed intermediaries and should present data that’s “factual, truthful and balanced” and is “well timed and constant” with a mainland China-listed ETF’s providing paperwork.
The SFC clarified that the analysis report “might include views on shopping for, holding or promoting with goal costs supplied that there’s a cheap foundation for such views”.
Regulatory issues about offering data on mainland China-listed ETFs included the potential for cross-promotion or different inappropriate exercise when a CSRC-licensed group firm of an middleman distributes such ETF analysis report.
In such circumstances, the SFC round states that an middleman should “train due talent, care and diligence” when it selects or screens the CSRC-licensed group firm to “guarantee its competence”.
An middleman should additionally implement processes and procedures to make sure the group firm complies with relevant mainland legal guidelines and laws and guarantee a legally binding written contract is in place between itself and the group firm, in line with the Hong Kong regulator.
The HK-China ETF Join went stay in 2022 with 87 preliminary eligible merchandise, 83 of which have been mainland-listed ETFs that might be accessed by Hong Kong buyers.
Over the previous two years, the variety of eligible mainland-listed ETFs below the scheme has risen to only over 141.
In April this yr, inventory exchanges in Hong Kong and China agreed to calm down necessities for ETF funds that may be included within the Inventory Join schemes, giving a lift to the HK-China ETF Join. The growth of the scheme happened in July.
Tom Digby, Invesco’s head of ETF enterprise growth and capital markets for Asia Pacific, advised Ignites Asia on the time that Hong Kong authorities had been “comparatively fast” in increasing the ETF Join scheme.
“The problem for the ETF issuer is the way you go about authorising and advertising them on each side,” stated Digby.
Promoting and distributing Hong Kong-listed ETFs in mainland China and vice versa is “very tough below the present joint advertising regimes”.
*Ignites Asia is a information service revealed by FT Specialist for professionals working within the asset administration business. Trials and subscriptions can be found at ignitesasia.com.