Singapore signs new China ETF connect agreement with Shanghai

The Singapore Exchange and Shanghai Stock Exchange are working to establish a new exchange traded fund scheme as they seek to deepen cross-border connectivity for issuers and investors in Singapore and mainland China.

The two exchanges have signed a memorandum of understanding for an ETF scheme with a master-feeder fund model, allowing investors in both markets to access feeder ETFs that link to locally listed ETFs on each other’s exchanges, according to a joint statement released on Monday.

This comes a year-and-a-half after the Singapore bourse inked an agreement for an ETF link-up with the Shenzhen Stock Exchange, one of the three independently operating bourses in the country.

Just a handful of companies have so far taken advantage of the ETF link-up between Singapore and China, however, with few others seemingly rushing to make use of the scheme.

In October last year, UOB Asset Management teamed up with its Chinese joint venture partner Ping An Fund Management to roll out the first ETF to be traded under a Singapore-Shenzhen master-feeder ETF scheme.

Assets in the Singapore-listed UOB AM Ping An ChiNext ETF did, however, skyrocket 244 per cent in the two weeks after its debut on November 14.

At the end of December, CSOP Asset Management launched two more Singapore-listed ETFs, marking just the second and third products under the ETF link.

CSOP AM, which opened its first overseas office in Singapore in 2019, plans to participate in the Singapore-Shanghai master-feeder ETF link-up as well as the Shenzhen one, given the differences between the two bourses.

“I don’t think the Shenzhen and Shanghai links are necessarily in competition because the products that are listed on the respective exchanges are different,” said Melody He, CSOP AM’s Hong Kong-based deputy CEO.

The Shenzhen Exchange was known for small-cap and ChiNext, whereas Shanghai traditionally offered more large cap and blue chip companies, she added.

She said that any ETF that might be cross-listed back to Shanghai or Shenzhen would need to have a “local flavour”.

“Chinese investors are quite interested in low-carbon themes and South-East Asia, this is an area which they’ve never really invested in, so it’s something that’s different from what they would find in China,” He said.

SGX Group CEO Loh Boon Chye said the latest partnership would “explore new areas of co-operation” between the two countries.

The Singapore bourse’s co-operation with the largest exchange in mainland China is set to widen the selection of ETF products available for listing of feeder funds, pave the way for greater collaboration between issuers and enhance investment options for investors in both markets, according to the release.

“SSE and SGX Group will continue to promote cross-border co-operation between China and Singapore and develop more connectivity products investing in selected ETFs to meet the growing demand for cross-border opportunities between both markets,” SSE president Cai Jianchun said.

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