HK taking its time with yuan ETF reviews
(HONG KONG) Hong Kong’s market regulator is carrying out a strict review of the first renminbi-denominated exchange traded funds for sale in the city. The Securities and Futures Commission is conducting due diligence investigations of the four Chinese companies issuing the products, according to an industry source familiar with the situation.
Chinese regulators have already issued licences for the physical A-share ETFs under the renminbi qualified foreign institutional investor program, or RQFII.
China Asset Management (Hong Kong) plans to launch an RQFII ETF tracking the CSI 300 Index, Harvest Global Investments’ RQFII ETF will track the MSCI A-Shares Index, E Fund Management (Hong Kong) is expected to use the CSI 100 Index for its RQFII ETF and CSOP Asset Management will choose the FTSE China A50 Index for its RQFII ETF.
The SFC has lined up visits with each of the companies’ Hong Kong subsidiaries to conduct interviews with managers, according to the industry source, who asked not to be named. The companies are being asked for two to three presentations on the ETFs during the visit.
China Asset Management (Hong Kong) and CSOP Asset Management have already been interviewed, according to the source.
Since the companies have no experience in launching ETFs in Hong Kong, the strict review will be good for them and the market, the source says.
The four ETFs represent the second batch of RQFII products to be launched in Hong Kong, with a total quota of Rmb50bn ($7.9bn).
Unlike the first batch, which was approved nearly simultaneously, the second batch is under a much stricter SFC review process. The extra attention attracted by recent press coverage of RQFII products may be part of the reason.
Five to six other Chinese companies are also waiting in line for the approval of RQFII ETFs, according to the source.