Shanghai Exchange Officially Launches China-Japan ETF Connectivity Scheme

China-Japan Connectivity Scheme
A trading screen is seen following the opening of the markets (Photo: Reuters / Henry Nicholls)

The Shanghai Stock Exchange accelerated the launch plans of its highly-anticipated China-Japan Connectivity scheme, which will allow investors from both countries to trade each other's stocks. The scheme was officially launched this week with a launch ceremony held at the exchange in Shanghai.

During the launch ceremony, the exchange formally opened four products under the China-Japan ETC Connectivity scheme. The products started trading at the Shanghai bourse on Tuesday.

The funds that were initially open for trade on the exchange during the launch were four Chinese funds, namely China Asset Management, HuaAn Funds, China Southern Asset Management, and E Fund Management. Four Japanese funds were also cross-listed on the bourse, namely Asset Manage One, Nikko Asset Management, Mitsubishi UFJ Kokusai Asset Management, and Nomura Asset Management. The four Japanese funds are currently traded at the Tokyo Stock Exchange.

The China-Japan ETC Connectivity scheme was conceptualized not more than 10 months ago. In October of last year, the Shanghai Stock Exchange signed an agreement with Japan Securities Group to get the ball rolling in establishing the mutually beneficial scheme.

Following the agreement, a feasibility study was immediately conducted to ascertain the advantages and disadvantage of opening up the new inter-exchange trading scheme. In April of this year, both parties finalized their deal at the China-Japan capital market forums. Institutional investors in both countries were then instructed to start setting up different funds that will be cross-listed in the respective exchanges of both countries.

The opening of the China-Japan Connectivity scheme comes at the heels of the recent launch of the Shanghai-London Stock Connect earlier this month. China Securities Regulatory Commission vice-chairman, Fang Xinghai, mentioned during the China-Japan ETF launch ceremony that the recently launched inter-exchange programs are clear signs that China is now opening its capital market to the rest of the world. Fang further pointed out that the partnership with worldwide capital markets will ensure a more transparent, dynamic, and resilient market in China.

Without directly mentioning China's trade dispute with the United States, Fang stressed that the partnership between the world's second and third-largest economies is vital in light of rising global trade tensions.

According to the general manager of the Shanghai Stock Exchange, Jiang Feng, the bourse is now actively seeking new opportunities and partnerships with stock exchanges in other markets. Partnering with other capital markets and allowing cross-listings will apparently create a two-way opening between nations aimed at further developing and enhancing global capital markets.

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