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Yuan trade settlements encouraged in SAR (2)

By Li Tao, Sophie He and Chen Jia in Hong Kong  (China Daily)

08:18, June 28, 2012

ETFs to get welcome

Meanwhile, the long-awaited issue of ETFs that track Hong Kong shares and those that are linked to A-shares are widely expected with an initial quota of 20 billion yuan each.

Analysts said that they don't believe the ETFs will be able to boost stock markets single-handedly. They said the move is more of a policy signal rather than a decisive factor for the markets.

Tse Kwok-leung, head of economics and policy research at Bank of China (Hong Kong), said he doesn't see the introduction of new ETFs stimulating the stock markets. The current stock market downturn is a result of a weak global economy, said Tse, adding that the recovery of the stock market needed to be backed by the recovery of the real economy.

But Tse believes investors from both the mainland and Hong Kong will be very interested in the approaching ETFs, "as they will provide a direct access to each other's bourse for stock trading".

Tse said although the actual initial scale of the ETFs is yet to be unveiled, the cooperation in financial markets between mainland and Hong Kong has always been step-by-step, and the scale will be expanded gradually.

The ETFs are expected to get a warm welcome by investors.

Ronald Wan, honorary chair professor at the Renmin University of China, also believes that Hong Kong branches of mainland brokerages will share the quota of A-share tracking ETFs. "They will have certain advantages in developing yuan-denominated products, due to their background," he said.

As for the joint ventures for stock exchanges in Hong Kong, Shenzhen and Shanghai, Chen Daofu, an economist at the State Council's Development Research Center, believes the collaboration could be in the areas of risk management, product design and trading system operation, which can change the current competition into a cooperative relationship.

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