Given that Taiwanese investors have been barred from investing in China’s A shares through the Shanghai-Hong Kong stock links expected to begin next month, market consultants on Saturday said they should buy exchange traded funds (ETFs) related to A shares to tap the Chinese bourse.
The Shanghai-Hong Kong Stock Connect is expected to begin by the end of next month.
The mechanism will allow foreign investors to trade China’s A-shares in Hong Kong and investors in Shanghai will be able to trade Hong Kong shares in China.
The Financial Supervisory Commission (FSC) has announced that average Taiwanese investors will not be allowed to use the new mechanism to buy A shares in Shanghai, although retail investors with no less than NT$30 million (US$988,800) in assets and institutional investors with at least NT$50 million in assets will be able to do so.
Commission Chairman William Tseng (曾銘宗) said that the restrictions on average investors are aimed aim at stopping large fund outflows after a great number of retail investors rush to use the Shanghai-Hong Kong market links as a springboard to buy A shares.
Companies listed on China’s exchanges offer two classes of shares: A shares denominated in Chinese yuan for Chinese investors to trade, and B shares denominated in US dollars or Hong Kong dollars for foreign investors to trade.
Market consultants said despite the commission’s ban, average investors will be able to invest in ETFs, which track A shares in China, instead of investing directly in the A shares themselves.
There are many ETFs linked to A shares in the local bourse, such as the W.I.S.E Yuanta/P-shares CSI 300 ETF, the Fuh Hwa CSI 300 A Shares Exchange Traded Fund, and the Yuanta/P-shares SSE50 ETF.
Consultants are also recommending buying into securities, which generate fixed income and usually offer relatively high yield, including yuan-denominated bond ETFs.
Local investors have long showed strong interest in securities listed in foreign markets.
The Taiwan Securities Association said orders placed by local investors to securities companies in the nation to buy stocks overseas totaled NT$783.9 billion for the first seven months of this year, up 28.4 percent from a year earlier.
The number of accounts valid at brokerages as of the end of July for investors to place orders to buy stocks overseas hit 937,231, up from 874,161 recorded at the end of December last year, indicating that many investors are highly interested in securities overseas.
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