Shanghai and South Korea exchanges plan ETF Connect

May 13th, 2021 | By | Category: ETF and Index News

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Shanghai Stock Exchange and Korea Exchange have announced they are collaborating on a scheme for linking the ETF markets of both exchanges.

Shanghai and South Korea exchanges plan ETF Connect

China and South Korea are working on a scheme to facilitate trading in each other’s ETF markets.

The China-Korea ETF Connect was revealed as the two exchanges signed an updated memorandum of understanding (MOU) to enhance cooperation and boost cross-border investment.

The MOU was signed on 11 May via video-link by Cai Jianchun, General Manager of the Shanghai Stock Exchange, and Sohn Byungdoo, Chairman of the Korean Stock Exchange.

The agreement also laid out plans to work together on the further development of indices relevant to the two countries securities’ markets.

China has already established ETF Connects with both Japan and Hong Kong as the country moves to increasingly open up to international investors.

The schemes typically involve the listing of a so-called ‘feeder’ ETF, run by a local asset manager, which invests at least 90% of its assets in a target ETF listed in the other market. Eligible target ETFs must satisfy certain requirements related to liquidity and trading history.

In terms of accessing China’s ETFs, trading is based on additional Qualified Foreign Institutional Investor (QFII), Renminbi Qualified Institutional Investor (RQFII), and Qualified Domestic Institutional Investor (QDII) quota specially created for the schemes.

The China-Japan and China-Hong Kong ETF Connect schemes launched in 2019 and 2020, respectively; however, they have only registered limited activity thus far.

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