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New BBH survey reveals pent-up demand for ETFs among Chinese investors

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The potential inclusion of ETFs in China-Hong Kong Stock Connect program would likely unleash pent-up demand for Hong Kong ETFs from mainland Chinese investors, according to a new survey by ETF custodian, administrator, and trustee Brown Brothers Harriman (BBH).

Nearly 90 per cent of mainland investors surveyed said they would likely invest in ETFs through the Stock Connect program, which allows international investors to trade securities listed on the Shanghai and Shenzhen exchanges, and mainland investors to trade securities listed on the Hong Kong exchange. 

While ETFs are not currently part of Stock Connect, regulators are planning their future inclusion as early as late 2018.

BBH says the results also point to strong ETF investment growth across Greater China in 2018 and an uptick in investor demand for products with diversified exposure. While 43 per cent of Mainland investors plan to increase their ETF holdings, 65 per cent of investors surveyed in Hong Kong and Taiwan are looking to increase their ETF exposure.

Chris Pigott, BBH’s Head of Hong Kong ETF Servicing, says: “Regulatory reform has helped spur the growth of ETFs in the US and Europe. The inclusion of ETFs in Stock Connect will open another cross-border channel for Mainland investors to deploy their capital and further diversify their investment outside the Mainland. This development presents a significant opportunity for regional and global asset managers.”

BBH surveyed 100 financial intermediaries and institutional investors from the Mainland, Hong Kong and Taiwan C all of whom were invested in ETFs. The survey provides insights into the current state and future of ETFs in Greater Chinas rapidly expanding and evolving markets.
 

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