According to a statement from China and Singapore, China and Singapore are making good progress in developing an exchange traded fund connectivity programme.
According to a speech made by Fang Xinghai, vice chairman of the China Securities Regulatory Commission, both sides will push for early realisation of the ETF markets in a joint programme between the Shenzhen Stock Exchange and the Singapore Exchange.
Fang didn't elaborate on how the two ETF markets would be connected, nor the timeliness of such a launch.
In the opening of the annual China-Singapore Connectivity Initiative Financial Summit on Tuesday, Fang said that a closer collaboration between regulators would facilitate the operations of financial institutions from both sides in the capital markets. In November, China's equitiesETFs have exceeded Rmb 1 tn $157 bn in aggregate assets, more than a decade and a half after the first onshore strategy came on the market.
The rapid growth of the onshore stock exchange market has been benefited by the push from regulators and stock exchanges in Shanghai and Shenzhen, the transparent, low-risk and affordable nature of theETF product, and the proliferation of thematic strategies.
In Singapore, regional investor interest in China-linkedETF products has also increased, as well as in China-linkedETF products.
In September of last year CSOP Asset Management listed its first ETF in Singapore: the Chinese Government Bond IndexETF. The fund became the largest exchange traded fund in the city-state just over a month after it was launched, underscoring strong interest from global investors wanting access to China's onshore debt markets.
The Hong Kong-based asset manager said at the time that the rapid rise in the ETF's asset pool was partly driven by China's stable economic recovery, the inclusion of Chinese government bonds in a FTSE bond index.
Over the past few years, China has developed multiple ETF cross-listed schemes with overseas exchange partners, with varying success rates, as regulators try to tap demand for passive exposure to Chinese markets regionally and globally.
A cross-listing master-feeder framework was set up in Shenzhen and Hong Kong last year, with three pairs of ETFs approved for sale in the respective markets.
Neither the Japan, nor the Hong Kong ETF connectivity schemes have yet to take off.
The Master Feeder scheme in August last year was relatively subdued and still lacks clear regulatory guidelines on products that might qualify for the scheme. Since the initial batch of ETFs was listed in October last year, few new products have been approved for the scheme.
In May this year, the Shanghai and South Korea stock exchanges agreed to establish a new cross-border ETF programme similar to the existing China-Japan and mainland China-Hong Kong ETF cross-listing schemes.
The model allows South Korean and Chinese fund groups running Exchange Traded Funds in Shanghai or Seoul to link a locally listed strategy to one listed on the other exchange, giving access to local securities and broadening sales prospects outside the home market.
It is still unclear when the scheme will launch and what ETF strategies each exchange will bring to the neighbouring market, but industry experts predict that the flow of investment is likely to be dominated by South Korean investors investing in China-themed ETFs.
The Shanghai bourse launched its first onshore ETF product in 2004 and has set its sights on establishing cross-border ETF listing schemes with Switzerland and even Pakistan.
As of October, foreign investors had Rmb 3.67 tn worth of Chinese A-shares, making up about 5 per cent of the combined market value.
Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to industry trends.