HSBC supports launch of Daiwa Asset Management’s first ETF under China-Japan Connect scheme 

The move by Daiwa AM could revitalise investment activity conducted on the China-Japan ETF Connectivity scheme. 

By Joe Parsons
HSBC has helped Daiwa Asset Management (Daiwa AM) launch two new exchange traded funds (ETFs) under the new China-Japan connectivity scheme.  

The debut of the Daiwa AM iFree ETF China GBA100 in Japan marks the first overseas-listed Shenzhen Stock Exchange (SZSE) ETF tracking the SZSE GBA100 index. 

The GBA index is expected to be a key contributor to China’s economic development as it develops into an international science and technology innovation centre. 

In addition, the Daiwa AM managed iFreeETF China STAR50, the first overseas-traded STAR50 ETF in Asia, tracks the Shanghai Stock Exchange (SSE) Science and Technology Innovation Board 50 Index (the STAR 50 Index) and covers the fastest growing high-tech companies in China. This is the second batch being added to the China-Japan ETF connectivity scheme. 

“China continues to expedite the two-way opening up of its capital markets to overseas markets, and is steadfastly expanding product types and diversifying cross-border investment options for offshore investors,” said Sophia Chung, head of securities services for HSBC in China.  

With the inception of the new ETFs, including the first overseas-traded STAR50 ETF in Asia and the first overseas-listed SZSE ETF, global investors will have easier access to Shanghai’s Nasdaq-style tech board and the GBA growth story.” 

The China-Japan ETF Connectivity scheme was introduced in 2019 between the Japan Exchange Group (JPX) and Shanghai Stock Exchange (SSE), with the aim of creating more opportunities for cross-border securities investment between the two countries. 

Where the scheme differed to others is that it made ‘ETFs of ETFs’ possible without major changes required between each other’s differing investment trust laws, systems for settlement and registration, taxation and financial instruments.  

Yet activity through the scheme has been relatively low, and at the end of 2020, only four Eastbound ETFs and four Westbound ETFs had been listed on the stock exchanges in Shanghai and Tokyo. However, the move by Daiwa AM could step up investment through the scheme.  

“Japan strengthens its position as an international financial hub, facilitating greater access to China’s markets as Japanese and other global investors can now indirectly invest in Chinese assets through feeder ETFs listed on the Tokyo Stock Exchange to capture opportunities in the GBA and China’s technology sector,” added Chikako Nagahara, head of markets and securities services for HSBC in Japan 

HSBC has been at the forefront in supporting some of the region’s new cross-listed ETFs. In October, it was appointed as the securities services provider for the first two ETFs traded launched by Hang Seng Investment Management and CSOP Asset Management under the new cross-listing scheme between Hong Kong and Mainland China.  

Last year, it also supported the launch of the first ETF under Singapore’s new Variable Capital Company (VCC) structure and the first broad-based ESG ETF listed on the Hong Kong Stock Exchange.