Singapore signs a new China ETF connect agreement with Shanghai

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The Singapore Stock Exchange and the Shanghai Stock Exchange are working to set up a new Exchange Traded Fund scheme in an effort to deepen cross-border connectivity for issuers and investors in Singapore and mainland China.

The two exchanges 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 their respective exchanges, according to a joint statement. released on Monday.

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

However, so far only a handful of companies have taken advantage of the ETF’s link between Singapore and China, while a few others appear to be rushing to use the scheme.

This article was previously published by Turn on Asiatitle owned by the FT Group.

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

Assets of the Singapore-listed UOB AM Ping An ChiNext ETF, however, skyrocketed 244% in the two weeks following its Nov. 14 debut.

At the end of December, CSOP Asset Management launched two more Singapore-listed ETFs, flagging only 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 in addition to the Shenzhen one, given the differences between the two exchanges.

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

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

He said any ETF that could be cross-listed in Shanghai or Shenzhen should have a “local flavor.”

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

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

The Singapore Stock Exchange’s cooperation with the largest exchange in mainland China is set to broaden the selection of ETF products available for feeder fund listing, pave the way for greater collaboration between issuers and improve investment options for investors in both markets, according to the publication.

“SSE and SGX Group will continue to foster cross-border cooperation between China and Singapore and develop more connectivity products by investing in selected ETFs to meet the growing demand for cross-border opportunities between the two markets,” said SSE Chairman Cai Jianchun.

*Ignites Asia is a news service published by FT Specialist for professionals working in the wealth management industry. Trials and subscriptions are available at ignitesasia.com.