Cross-border ETFs hit markets

The mainland's first two exchange-traded fund (ETF) products issued by local brokerages and tracking Hong Kong stock indices made their secondary market debut Monday, according to an announcement released that day by stock exchanges in Shanghai and Shenzhen, a development which experts say will make it easier for more local retail investors to tap the overseas capital market.

Specifically, Beijing-based China Asset Management Co (China AMC) plans to trade 3.59 billion shares of an ETF tracking the Hang Seng Index on the Shenzhen Stock Exchange, while Guangzhou-based E Fund Management Co (E Fund) intends to offer 2.02 billion shares of an ETF tied to the Hang Seng Enterprises Index on the Shanghai Stock Exchange.

Despite the recent downturns seen at equity markets in East Asia and elsewhere, the carefully regulated Hong Kong stock market continues to perform well, boosting domestic investors' enthusiasm for the cross-border ETFs, according to a trader from E Fund, surnamed Zhou.

Since April 2006, retail investors have been allowed to invest in overseas equities indirectly through financial products offered by qualified domestic institutional investors (QDII) and approved by the State Administration of Foreign Exchange (SAFE). Such products have so far proved relatively unpopular due to the inconveniences they present to investors, Wang Qunhang, director of Huatai Securities' fund research center, told the Global Times.

Earlier generations of QDII products required investors to file formal applications with the SAFE and the CSRC prior to each intended trade move and carried high service fees, said Wang. The products launched Monday though, which also fall under the country's QDII scheme, can be traded like stocks for services fees less than 90 percent of previously introduced QDII vehicles, Wang explained.