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Cryptocurrency News Articles
Hong Kong Bitcoin ETFs Set to Welcome Mainland Chinese Investors
May 06, 2024 at 02:15 pm
Hong Kong-listed Bitcoin ETFs may soon become accessible to mainland Chinese investors through Stock Connect integration. Richard Byworth of SyzCapital suggests the move could bring a surge of capital into digital asset funds, citing discussions surrounding the possibility. Industry experts like Samson Mow and Brian HoonJong Paik highlight the financial and socio-economic factors driving this potential integration, including the need for alternative investments in China and the existence of established financial channels between the two regions.
Hong Kong Bitcoin ETFs on the Horizon for Mainland Chinese Investors
Byworth's Statement Ignites Rumors
Richard Byworth, Managing Partner at SyzCapital, has sparked speculation that Bitcoin exchange-traded funds (ETFs) listed on the Hong Kong Stock Exchange may soon become accessible to investors from mainland China. Byworth's comments on X, formerly known as Twitter, underscore the ongoing discussions surrounding the potential integration of these ETFs into the Stock Connect system. This integration could unlock a substantial influx of capital into these digital asset funds from the mainland.
"I just got back from Hong Kong. There is talk that the ETF could be added to stock connect. The implications for this are absolutely enormous (basically means mainland money can buy it)," Byworth stated. His remarks followed a dialogue initiated by Samson Mow, who highlighted the impressive initial performance of the ChinaAMC Bitcoin ETF, which garnered $121 million on its first trading day.
Optimism Surrounding Hong Kong's Bitcoin ETFs
Mow expressed optimism for the future of Bitcoin ETFs in Hong Kong, stating, "I think you guys should be a little more bullish." Brian HoonJong Paik, Co-founder & COO at SmashFi, elaborated on the financial and socio-economic factors likely driving mainland Chinese interest in Hong Kong's Bitcoin ETFs.
Paik emphasized the vast amount of Chinese wealth invested in real estate, with approximately 100 million empty homes, indicating a growing need for alternative investment opportunities to mitigate socio-economic risks. "It's just a matter of time. The CCP needs an alternative asset to mitigate social unrest," he said.
Paik dispelled the misconception that mainland Chinese investors are currently unable to invest in ETFs available on the Hong Kong Stock Exchange. He explained that various financial arrangements facilitate a robust flow of mainland capital into Hong Kong's markets.
Existing Channels for Mainland Chinese Investment
The Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect enable investors to trade stocks across the border, subject to daily transaction quotas. The Qualified Domestic Institutional Investor (QDII) scheme permits Chinese institutional investors to participate in overseas markets, including those in Hong Kong. Chinese residents can also invest through brokerage firms that operate legally in both territories.
Another important framework, the Mutual Recognition of Funds (MRF) between Hong Kong and Mainland China, allows eligible mutual funds to be distributed in each other's markets through a streamlined approval process. Paik argued that excluding Bitcoin ETFs from these arrangements would likely provoke significant discontent and disrupt the investment landscape in both regions.
"These mechanisms make the Hong Kong stock market one of the most accessible foreign markets for Chinese investors, promoting financial integration between the Mainland and Hong Kong. Excluding only the Bitcoin ETF would likely cause significant repercussions among both institutional and retail investors in both China and Hong Kong," he stated.
Potential Capital Inflow from Southbound Stock Connect
In mid-April, Singapore-based Matrixport projected that the approval and subsequent inclusion of Hong Kong-listed Bitcoin Spot ETFs into the Southbound Stock Connect could attract $25 billion in capital. This program facilitates up to 500 billion RMB ($70 billion) per year in transactions.
As of press time, Bitcoin (BTC) was trading at $64,172.
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