The pilot program, which provides mutual trading access between the Shanghai and Hong Kong stock markets, now enables UCITS to invest in A-shares listed on the Shanghai stock exchange.
It also gives the Luxembourg-domiciled fund an opportunity to invest using existing schemes, such as the Qualified Foreign Institutional Investor and Renminbi Qualified Foreign Institutional Investor programs.
The stock connect program allows foreign investors to trade Shanghai-listed shares through the Hong Kong stock exchange, and gives Chinese mainland investors the opportunity to invest in Hong Kong shares through the Shanghai stock market.
The director general of the Association of the Luxembourg Fund Industry, Camille Thommes, said the Hong Kong-Shanghai stock connect program – which launched on 17 November – is one of “the biggest developments” for foreign investors.
“Over the past few years, the Chinese economy and financial markets have undergone a remarkable transformation and seen significant growth,” she said. “More specifically, the Chinese equity market has grown to the second largest equity market in the world after the US.”
Luxembourg UCITS wishing to access the market via the stock connect program must take into consideration a number of factors, such as the type of broker model used, and the prospectus for disclosing information to investors, particularly the need to provide a Key Investor Information Document (KIID).
This is the first UCITS to be approved after several applications were sent to the supervisory authority, the Commission de Surveillance du Secteur Financier.
The supervisory authority will fast-track those applications for Luxembourg UCITS which are already permitted to invest in A-shares, giving them quick access to the Hong Kong and Shanghai stock market. The UCITS will be required, however, to adapt their prospectus and KIID.