ETF Connect may not roll out this year

Chief executive of the Hong Kong Exchanges & Clearing Ltd Charles Li Xiaojia speaks at a press conference in Hong Kong, Feb, 27, 2017. [Photo/Xinhua]

Following the debut of Shanghai-Hong Kong Stock Connect in 2014 and Shenzhen-Hong Kong Stock Connect in 2016, financial regulators across the border are exploring whether the mutual market access can be extended to ETFs, the head of the Hong Kong Exchanges & Clearing Ltd said on Monday, as the operator of the Hong Kong equity bourse reported net profit of HK$ 5.8 billion ($740 million) in 2016, down 27 percent from 2015.

The proposed Exchange-Traded Fund would be the next big thing on the agenda of Asia's biggest exchange operator by market capitalization.

But due to the difference between trading systems, the much-anticipated ETF Connect may not be rolled out within this year, HKEX Chief Executive Charles Li Xiaojia told a news conference. Li added that the Bond Connect was currently under discussion.

"To further enrich the variety of traded products and provide more investment opportunities and convenience for domestic and overseas investors, we plan to include ETFs as eligible securities, subject to further discussion with our mainland counterparts," Li said in a statement on Monday.

The exchange operator also said it was setting its sights on growing the connect model by expanding into other asset classes.

These included primary listings, commodities, bonds and more－in a bold move to cement Hong Kong's position as the Chinese mainland's offshore wealth management center, risk management center and global asset pricing center, Li added.

The proposed ETF Connect between Hong Kong and the mainland will further diversify the city's ETF market and enhance the city to become a major regional ETF trading hub in Asia, ETF product service providers said in a panel discussion on Monday.

"Overseas investors are eager to allocate A-shares as an asset class in their portfolios. If the direct trading link could be extended to ETFs, Hong Kong could look at becoming a regional ETF trading hub in Asia," iShares Director Cyrus Mui said.