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First Lux UCITS approved Hong KongShanghai stock

Regulators have approved the first Luxembourg UCITS to invest in China's A-shares through the Hong Kong-Shanghai stock connect program.
Fund Selector Asia

The pilot program, which provides mutual trading access between the Shanghai and Hong Kong stock markets, 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 fund name was not disclosed.

Camille Thommes, director general of the Association of the Luxembourg Fund Industry, said more funds intend to follow.

“A number of Luxembourg UCITS have already seen the opportunity that this represents and sent their applications to the supervisory authority and the first one has now been approved.”

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.

“Biggest developments”

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.

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