Asia ETF Roundup (Industry) – May 2022

China-HK ETF Connect coming soon.

Jackie Choy, CFA 08.06.2022
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For economic and market news relating to Asian ETFs, please refer to our “Asia ETF Roundup (Market) – May 2022”.

ETF Industry News

China-HK ETF Connect Coming in Two Months

On 27 May, the China Securities Regulatory Commission (CSRC) and the Hong Kong Securities and Futures Commission jointly announced that they have agreed in principle to include ETFs as eligible securities in the stock connect schemes between the Mainland and Hong Kong exchanges. According to the announcement, preparation for the formal implementation will take about two months. 

The preliminary criteria for eligible ETFs were also released by the Mainland and Hong Kong exchanges, where eligibility is determined based on various factors such as the fund size and whether the index tracked by the fund mainly comprises eligible stocks under the Stock Connect. 

These are the key criteria for inclusion of ETFs in Stock Connect:


  • Daily average assets under management over the last six months no less than HKD 1.7 billion (USD 216 million)
  • Synthetic ETFs and leveraged and inverse products are not eligible 
  • Listing history of no less than six months; Benchmark index history no less than one year
  • 90%+ weighting of the index constituents listed on the Hong Kong Exchange
  • 70%+ weighting of the index constituents eligible under southbound stock connect for Hang Seng Index, Hang Seng China Enterprises Index, Hang Seng TECH Index and Hang Seng Hong Kong-Listed Biotech Index; 80% for other indices


  • Daily average assets under management of the ETF over the last six months no less than RMB 1.5 billion (USD 225 million)
  • Listing history of no less than six months; Benchmark index history no less than one year
  • 90%+ weighting of the index constituents are A-Shares listed on the Shanghai Stock Exchange or the Shenzhen Stock Exchange; 80%+ weighting of index constituents eligible under northbound stock connect

The list of eligible ETFs is yet to be announced by the exchanges as the detailed eligibility criteria are subject to regulatory approval (detailed eligibility can be found on the HKEx website: southbound and northbound, along with an FAQ). Based on the current criteria, we estimated that less than 10 Hong Kong-listed ETFs are eligible for the southbound (with more than this number of eligible ETFs for the northbound). While “the scope of ETF Connect may look narrow at first”, as remarked by the CEO of the SFC in a speech on 25 May, we view this development positively as it will allow both ETF markets to expand their investor base. The addition of ETFs in the Stock Connect schemes will also lay the foundation for an ecosystem among stock connect eligible stocks and the ETFs with those as underlying securities. 


India Released New Guidelines for Passive Funds


On 23 May, the Securities and Exchange Board of India released a set of new guidelines on index funds and ETFs, namely, “Circular on Development of Passive Funds”. The provisions of the circular will come in effect from 1 July 2022 and applicable to all existing ETFs/index funds.


The new guidelines set out the requirements for debt ETFs and are expected to promote liquidity for ETFs, for example, through raising the minimum amount for direct transactions with the asset management companies and incentivizing market making activities. Here is a summary of the circular:

  • Norms for debt ETFs/index funds - Including the requirements on index constitution and replication for various types of debt ETFs (such as those investing in corporate bonds, government securities, etc.)
  • Norms for market making framework for ETFs - Including the requirement to appoint at least two market makers and set out incentives for market makers, such as linking the incentive structures with ETF liquidity (as measured by volume and bid-ask spread).
  • Direct transaction in ETFs through AMCs – Only subscriptions/redemptions above INR 25 crore (INR 250 million, ~USD3.2 million) can be placed directly between investors and the asset management companies.
  • Tracking error and tracking difference - 2% one-year tracking error; 1.25% annualized tracking difference for debt ETFs/index funds.
  • Disclosure of indicative net asset value (iNAV) – iNAVs of ETFs to be disclosed during the trading hours.
  • Liquidity window for investors of ETFs with AMCs – Setting out scenarios where investors can directly approach AMC for redemptions of ETFs for transaction of up to INR 25 crore.

Hang Seng Index Constituent Count Increases to 69

As part of Hang Seng Indexes’ May 2022 review of its benchmark series, the total number of number of constituents in the Hang Seng Index will increase to 69 from 66, effective on 13 June. The proforma weightings of the Hang Seng Index and the full details of the index review can be found here.

Constituent changes at the May Index review:

Hang Seng Index

  • Additions: Orient Overseas (00316), Zhongsheng Group (00881). SMIC (00981), China Hongqiao (01378)
  • Removals: AAC Technologies (02018)

Hang Seng China Enterprises Index

  • Additions: Lenovo (00992)
  • Removals: Hansoh Pharmaceutical (03692) 

Hang Seng TECH Index

  • Additions: NIO Inc (09866)
  • Removals: ASM Pacific Technology (00522)

Another 108 Companies Identified Under Holding Foreign Companies Accountable Act (“HFCAA”)

During the month of May, the U.S. Securities and Exchange Commission identified another 108 companies under the Holding Foreign Companies Accountable Act (“HFCAA”). This puts total number of companies on the provisional list and conclusive list of issuers identified under the HFCAA at 148 as of the end of May 2022. Companies added to the list during month included Huaneng Power (HNP) and NetEase (NTES). According to the HFCAA and the companies’ announcements, a company’s ADR could be delisted from a U.S. stock exchange if the company is identified on the list for three consecutive years.

Chinese Equity ETF Watch – Inflows into Offshore Chinese Equity ETFs in Hong Kong and Chinese Equity ETFs in the U.S.

  • Hong Kong-domiciled ETFs in the China Equity Category saw net inflows estimated at USD 0.3 billion in May, mainly coming from the Hang Seng China Enterprises Index ETF (02828/82828).
  • Hong Kong-domiciled ETFs in the China Equity - A-Shares Category saw small estimated net outflows of USD 13 million in May. Net inflows from the iShares FTSE China A50 ETF (82823/02823), estimated at USD 80 million was offset by the net outflows from the ChinaAMC CSI 300 Index ETF (83188/03188), estimated at USD 62 million, and net outflows from other ETFs.
  • Hong Kong-domiciled ETFs in the China Equity Category and the China Equity – A-Shares Category saw estimated year-to-date net inflows of USD 1.1 billion and net outflows of USD 0.3 billion, respectively.
  • In the U.S, we estimated net inflows of USD 0.2 billion from the iShares China Large-Cap ETF (FXI) and the iShares MSCI China ETF (MCHI), USD 0.1 billion from the Xtrackers Harvest CSI 300 China A ETF (ASHR) and USD 0.5 billion from the KraneShares CSI China Internet ETF (KWEB).


New Launches and Listings

China: 9 ETF New Listings

  • Chinese ETF providers listed 9 new ETFs on the Shanghai Stock Exchange and Shenzhen Stock Exchange in May. These launches included 8 thematic/sector ETFs and an ETF tracking the S&P 500 Index.
  • These listings put the total number of ETFs listed in China at 691 (254 ETFs on the SZSE, 437 ETFs on the SSE).

Hong Kong: 1 ETF New Listing

  • Bosera listed a leveraged ETF on the Hong Kong Exchange.
  • This listing put the total number of ETFs listed in Hong Kong at 247 (161 ETFs and 86 multiple counters, including 29 leveraged/inverse products).

South Korea: 14 ETF New Listings

  • Korean ETF providers listed 5 actively managed ETFs, 6 thematic/sector ETF, a bond ETF and two U.S. broad market ETFs on the Korea Exchange.
  • These listings put the total number of ETFs listed in South Korea at 569.

Taiwan: 3 New ETF Listing

  • ETF providers in Taiwan launched 2 thematic/sector ETFs and a strategic-beta ETF on the Taiwan Stock Exchange.
  • This listing put the total number of ETFs listed in Taiwan at 228.


ETFs Launched in May 2022 in the Asia ex-Japan Region



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About Author

Jackie Choy, CFA  is the Director of Passive Investment Ratings, Global Manager Research.

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