The continuous liberalization of the capital market in mainland China provides many opportunities for international institutional investors. The long-awaited exchange-traded fund (ETF) connect scheme between Hong Kong and mainland China began July 4, 2022, with aggregate debut trading volume amounting to RMB28.5 billion (US$4.25 billion). In addition, a new initiative, “Swap Connect,” was announced to allow mutual access between Hong Kong and mainland China’s interest rate swap markets. These two initiatives mark a major milestone in the ongoing market opening of the mainland China capital market and for the participation of overseas investors in local ETFs and derivatives, on top of the existing access to equities and bonds.
In our recent white paper “The Future of Asset Management in Asia,” investors in mainland China and Hong Kong showed a preference for a more risk-aversive approach, as well as an interest in ETFs (42% for mainland China and 52% for Hong Kong) in the next 12 months. With increasing global volatility driven by the Ukraine-Russia conflict, most investors in mainland China and Hong Kong are moving investments into lower risk options as well.
With the ongoing market volatility and uncertainty, how should overseas asset managers tap into the Greater China region?
Patrick Yu, GM, SVP and Senior Partner at FleishmanHillard Hong Kong, shared three key ideas for overseas asset managers to enter the market.
