Exchange traded funds holding Chinese A-shares stocks, the equities trading in Shanghai and Shenzhen, could continue their recent upside Monday after regulators finally set a launch date for the widely anticipated Shanghai-Hong Kong Stock Connect.
The Shanghai-Hong Kong Stock Connect, the program aimed at increasing securities trading between Hong Kong and mainland China, was previously scheduled to launch last month but will instead debut on November 17. [Allure of A-Shares ETF Rises]
Once the Shanghai-Hong Kong Connect launches, foreign investors will be able to account for nearly a quarter of daily trading, a catalyst that buoyed demand for soaring A-shares ETFs. News of the Nov. 17 launch date sent Chinese stocks soaring during Monday’s Asian session with financial services names leading the way on the mainland.
The Deutsche X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR), the largest U.S.-listed A-shares ETF, allocates over 41% of its weight to the financial services sector while the the KraneShares Bosera MSCI China A-Shares ETF (NYSEArca: KBA) features a 36.3% weight to that sector. The Market Vectors ChinaAMC A-Share ETF (NYSEArca: PEK) allocates 35.3% of its weight to financials.
Over the past 90 days, those ETFs are up an average of 7.2% while the iShares China Large-Cap ETF (NYSEArca: FXI) has traded lower.
“The exchange connect expands access to Chinese markets from a limited number of qualified institutions to anyone with a Hong Kong brokerage account. The $64 billion Qualified Foreign Institutional Investor program has allowed overseas money managers to buy local securities since 2002, while a similar program using offshore yuan began in 2011,” according to Bloomberg.