China, Japan a step closer to cross-list exchange-traded funds

[BEIJING] China and Japan made key progress on a programme that will allow cross-listing of exchange-traded funds (ETF) and make it easier for investors to buy shares in each other's nations.

Both sides have sped up market access and strengthened regulatory cooperation since a memorandum of understanding was signed in October, Yi Huiman, chairman of the China Securities Regulatory Commission, said in a statement on Monday. While he didn't say when the so-called ETF Connect would start operating, Nikkei previously reported that this could be as early as May.

China is pressing ahead with plans to allow more foreign investors into its market, including those from historical rival Japan, before President Xi Jinping makes his first visit to the country as president for the Group of 20 summit in June. The ETF link would allow some of the trillions of dollars stashed away by Japanese savers to flow into the world's best-performing stock market.

The Shanghai Composite Index has risen almost 30 per cent this year, the biggest gain among more than 90 global indices tracked by Bloomberg. Inflows are expected to increase after MSCI Inc said it will more than quadruple the weighting of China-listed equities in a benchmark index.

Hong Kong's Securities and Futures Commission is also discussing with Chinese authorities the possibility of dual-listed exchange-traded funds in China. But an ETF Connect is proving difficult to build, Christina Choi, SFC executive director and head of the investment products division, said last year. She cited issues including differences in cross-border settlement systems and operating timings.

BLOOMBERG