(Bloomberg) — Nasdaq OMX Group Inc. is betting that the Chinese authorities will let investors buy exchange- traded funds over the new link between Hong Kong andShanghai.
The New York-based exchange operator is partnering with fund managers in Hong Kong as it prepares for a future phase of the link to include ETFs, the companys vice president for global indexes, Robert Hughes, said. BMO Global Asset Management (Asia) Ltd., a subsidiary of Bank of Montreal, launched two Hong Kong-listed ETFs that track Nasdaq indexes last week.
I fully expect that in the near future ETFs will be part of it, Hughes said in an interview in Hong Kong. It would become a very interesting destination for ETF providers that have global businesses.
Stock Connect, which opened a week ago, allows foreign investors to bypass Chinas capital-control barriers, giving them greatly increased access to the countrys $4.2 trillion equity market. Hong Kong Exchanges & Clearing Ltd.s chief executive officer, Charles Li, has said that Chinas capital- markets regulators may widen the range of assets permitted to trade over the link, opening the way for mainland investors to buy Hong Kong-listed ETFs that track Nasdaqs indexes.
A spokeswoman for the China Securities Regulatory Commission declined to say whether the organization would expand the range of assets available through Stock Connect. She asked not to be identified, citing internal policy. Ernest Kong, a spokesman for Hong Kongs Securities and Futures Commission, also declined to comment.
Falling Short
International investors bought the maximum amount ofShanghai-listedshares permitted to them on Stock Connects opening day. Since then, flows have fallen far short of the quota as concern about execution risks and ownership of purchased assets has deterred fund managers, according to Nick Ronalds, the managing director for equities at the Asia Securities Industry & Financial Markets Association, a trade association for the biggest investors and brokers.
Hong Kong investors are limited to daily purchases of 13 billion yuan ($2.1 billion), while mainland traders can buy as much as 10.5 billion yuan.
The big investors are still waiting to see how it plays out when the dust settles, said Mark Konyn, who helps oversee $92 billion as the chief executive officer of Cathay Conning Asset Management Ltd. in Hong Kong.
