Starting now, insurance funds from mainland China will be permitted to invest in Hong Kong-listed exchange-traded funds (ETFs) via the Stock Connect program without counting against their qualified domestic institutional investor (QDII) quotas. This marks a significant step forward in enhancing financial market integration between the mainland and Hong Kong.
The national financial regulator will support mainland insurance companies in investing in Hong Kong ETFs through the Southbound Stock Connect, Deputy Director-General Xiao Yuanqi announced yesterday during a meeting with a Hong Kong delegation led by the city’s Financial Services and Treasury Bureau secretary, according to official sources.
Although insurance firms previously could invest in Hong Kong ETFs, their allocations were limited due to strict QDII quotas. This new policy allows mainland insurers more flexibility for diversified asset management through Hong Kong, bolstering the growth of its ETF market and expanding its ecosystem. It also demonstrates the central government’s strong backing for the development of Hong Kong’s capital markets and asset management industry, according to Hong Kong’s chief executive.
One investment executive from a large Chinese mainland insurer mentioned that his company is now considering putting more capital into Hong Kong ETFs as part of its future investment plans. “We have used the Southbound Stock Connect to trade Hong Kong equities, but ETFs were not previously part of our focus,” he said.
Bonnie Y. Chan, CEO of the Hong Kong Exchanges and Clearing, expressed gratitude for ongoing support, adding, “We welcome mainland insurers to utilize our wide range of products and risk-management tools to enhance their portfolios.”
She noted that the move toward greater diversification through Hong Kong ETFs will help energize the market and deepen its liquidity, reinforcing Hong Kong’s crucial role as a bridge connecting China with the global economy. This initiative supports the long-term growth of the Stock Connect program.
Since ETFs were incorporated into the Stock Connect in 2022, trading activity on both the Northbound and Southbound channels has seen continuous growth. Notably, high activity on the Southbound side has contributed significantly to the expansion of Hong Kong’s ETF space, according to HKEX data.
In the first seven months of the year, the average daily trading volume for Southbound ETFs reached HKD 5.8 billion (about USD 740 million), while Northbound trading averaged CNY 5.1 billion (roughly USD 760 million). These figures represent increases of 61% and 86%, respectively, compared to the previous year. Overall, the daily ETF trading in Hong Kong grew by 22%, reaching HKD 40.6 billion (approximately USD 5.2 billion).