Group 1 - The year 2025 marks the beginning of a new decade for the interconnection between mainland and Hong Kong capital markets, with expectations for deeper integration [1] - Since the launch of the Shanghai-Hong Kong Stock Connect in 2014, the range of interconnected financial products has expanded from stocks to various other financial instruments, including ETF Connect and Bond Connect [1] - The average daily trading volume for northbound and southbound trading has increased significantly, with a 21-fold and 40-fold growth respectively compared to the first month of operation in 2014 [1] Group 2 - Industry experts emphasize the need to simplify trading processes and align institutional, informational, and technical elements to enhance the integration of stock markets [1] - Current rules for the Hong Kong Stock Connect are complex, leading to difficulties for investors in understanding the criteria for inclusion and exclusion of stocks [1][2] - The calculation method for market capitalization under the Hong Kong Stock Connect has not been updated to align with the new methodology adopted by the Hang Seng Index, which could lead to misinterpretations by investors [2] Group 3 - The adjustment in the Hang Seng Index's calculation method is seen as more scientific, potentially increasing the quality of stocks eligible for the Hong Kong Stock Connect [2] - There are expectations that the rules for the Hong Kong Stock Connect will be revised to match the Hang Seng Index's calculation method by the second half of 2025 [3] - The deepening of interconnectivity is viewed as crucial for the development of both capital markets, enhancing their international competitiveness and facilitating high-quality growth [3]

Core Viewpoint - The "ETF Connect" initiative, which facilitates interconnectivity between mainland China and Hong Kong financial markets, is entering a new phase of high-quality development as it marks its third anniversary, with significant potential for future growth as global investors increasingly focus on the Chinese market [1]. Group 1: Future Development Prospects - Industry insiders believe that the future of "ETF Connect" is promising, with expectations of attracting more market participants and investors as the Chinese market gains global attention [1]. - As foreign investors' awareness of A-share ETFs increases, "ETF Connect" is anticipated to become a key direction for foreign institutions' asset allocation [6]. - The expansion of the scope of eligible assets under "ETF Connect" is expected to provide more opportunities for domestic investors to allocate global assets [6]. Group 2: Strategies for Growth - Fund companies are encouraged to innovate in product design, enhance liquidity, and promote investor education to drive the development of "ETF Connect" [2]. - Continuous improvement in product layout and innovation is essential to provide a wider range of options for foreign investors [2]. - Fund companies should focus on developing differentiated ETF products that reflect the characteristics of Chinese assets and enhance collaboration with overseas institutions [3]. Group 3: Product and Market Development - There is a need for fund companies to expand their product lines to cover more asset classes and develop unique indices to meet diverse investor needs [4]. - Enhancing investor education is crucial, particularly regarding cross-border investments, to improve understanding and usage of ETF products [4]. - Fund companies should actively participate in roadshows and training sessions organized by exchanges to reach more overseas clients and increase awareness of A-share ETFs [5]. Group 4: Mechanism Optimization - The "ETF Connect" mechanism requires optimization, including expanding the range of eligible products to include bond and commodity ETFs, and enhancing cooperation with overseas institutions [7]. - Suggestions include relaxing entry restrictions for product types and improving trading mechanisms to enhance cross-border investment efficiency [7]. - Continuous optimization of the "ETF Connect" mechanism is necessary to improve investor trading experience and efficiency [8].

Core Insights - Hong Kong Exchanges and Clearing Limited (HKEX) celebrated its 25th anniversary, evolving from a local exchange to a leading global international exchange [1] - In 2025, HKEX's IPO financing amount is expected to reclaim the global top position after six years, with 31 IPO projects raising a total of 884 billion HKD this year, surpassing last year's total [1][2] - The daily trading volume in the securities market has increased from approximately 130 billion HKD in 2000 to over 2400 billion HKD, representing a more than 17-fold increase [1] - The market capitalization has grown from 86 billion HKD in 2000 to 4960 billion HKD, an increase of over 56 times [1] - The number of listed companies on the Hong Kong stock market has surged from 790 to over 2600 [1] IPO Trends - From 2009 to 2021, HKEX ranked first globally in IPO fundraising seven times, but faced a decline starting in 2022, only returning to the top five in 2023 due to large companies like Midea listing [2] - Between 2014 and 2024, HKEX's cumulative IPO fundraising reached 303 billion USD, surpassing NASDAQ and NYSE, with mainland companies becoming a significant pillar of this market [2] - As of June 8, 2023, there are 165 mainland companies queued to list on HKEX, a significant increase from nearly 80 in mid-January [2] Market Reforms and Innovations - HKEX has implemented various reforms over the past 25 years, adapting to market needs and attracting a diverse range of investors and products [3] - The exchange has shifted its listing rules to accommodate unprofitable companies, particularly in the biotech and internet sectors, which are now seen as valuable listings [3] - HKEX aims to position itself as a leading fundraising hub for new economy and biotech companies, as well as a global offshore RMB business center [3] Cross-Border Financial Cooperation - The launch of the Cross-Border Payment System on June 22 aims to enhance financial cooperation between mainland China and Hong Kong, facilitating cross-border remittances [5] - Since the introduction of various mutual market access programs, the total balance of foreign investment in onshore stocks has increased over five times, with mainland companies now accounting for 81% of the total market capitalization of HKEX [5] - The mutual access mechanisms have expanded from stocks to include bonds, ETFs, and interest rate swaps, with further developments planned [6] Future Outlook - HKEX is focused on enhancing its market resilience and vibrancy, with ongoing improvements to trading systems and infrastructure [6] - The recent policy changes allow companies listed on HKEX in the Guangdong-Hong Kong-Macao Greater Bay Area to also list on the Shenzhen Stock Exchange, potentially increasing the number of "H+A" listed companies [6]

Core Viewpoint - The "ETF Connect" program has reached 265 products, showing increasing popularity and trading volume, with significant growth in both northbound and southbound transactions since its launch in July 2022 [1][3][6]. Product Expansion - The number of products under "ETF Connect" has increased by 178 since its inception, with 160 from the Shanghai Stock Connect, 88 from the Shenzhen Stock Connect, and 17 from the Hong Kong Stock Connect [3][4]. - The program is set to expand further in June 2024, with relaxed rules such as lowering the scale threshold from 1.5 billion to 500 million and adjusting index weight requirements from 90% to 60%, allowing more small-cap and thematic ETFs to be included [3][4]. Trading Volume Growth - Northbound trading volume reached 415.14 billion RMB in May 2023, a 95-fold increase compared to the first month of operation in July 2022, with historical peaks of 1,090.15 billion RMB in October 2024 [7][8]. - Southbound trading also saw significant growth, with May 2023 transactions at 460.39 billion HKD, and monthly averages for the first five months exceeding 760.51 billion HKD, with April 2023 hitting a record high of 1,207.06 billion HKD [7][8]. Market Dynamics - The increase in trading activity is attributed to multiple factors, including policy support, market liquidity, and diverse investor demand, alongside product innovation and improved market sentiment [7][8]. - The attractiveness of Hong Kong stocks to mainland investors is highlighted by the performance of specific ETFs, such as the innovative drug ETF and high-dividend ETFs, which have seen substantial gains [8]. Future Development - The future of "ETF Connect" is seen as promising, with expectations for further product diversification and the inclusion of other asset classes like bonds [10][16]. - Fund companies are encouraged to innovate in product design, enhance liquidity, and improve investor education to better serve both domestic and international investors [12][14][15]. - Optimizations in the trading mechanism and product admission criteria are suggested to enhance the efficiency and appeal of "ETF Connect" [17][18].

Core Viewpoint - The "ETF Connect" has significantly transformed the capital market landscape in China over the past three years, enhancing trading activity and providing new momentum for market development [1][2]. Summary by Sections Development and Growth of "ETF Connect" - Since its launch on July 4, 2022, the number of "ETF Connect" products has increased from 87 to 265, reflecting a substantial expansion in product offerings [3][4]. - Trading volume has surged, with northbound trading reaching a total of 256.36 billion RMB in the first five months of the year, a 148% increase compared to the same period last year, while southbound trading amounted to 416.34 billion HKD, a 180% increase [3][4]. Impact on Market Integration and Internationalization - "ETF Connect" has played a crucial role in enhancing the integration of domestic and Hong Kong markets, facilitating cross-border investment and promoting the internationalization of the RMB [4][5]. - The mechanism has been recognized as a key component of China's financial opening strategy, providing a more convenient and efficient investment channel compared to traditional methods like QFII and RQFII [7][8]. Advantages of "ETF Connect" - The mechanism allows for easier access to a diverse range of investment products without the complexities of qualification and capital approval processes, thus attracting more international investors [7][8]. - "ETF Connect" has been described as a "passive investment bridge" that not only enhances trading activity but also fosters deeper integration of market rules, valuation systems, and investor structures between mainland China and Hong Kong [8][9]. Future Potential and Innovations - The lowering of entry thresholds for "ETF Connect" is expected to further stimulate product innovation and layout by asset management institutions in both regions [8]. - The inclusion of REITs and support for leading domestic companies to list in Hong Kong are among the measures being implemented to inject new vitality into the capital market [9].

Core Viewpoint - The future potential for deepening the interconnection between mainland China and Hong Kong capital markets is significant, with calls from the industry and investors for further expansion of interconnection mechanisms [1][3]. Summary by Sections Interconnection Mechanisms - Suggestions were made to enhance the depth and breadth of existing mechanisms such as Stock Connect, Bond Connect, Cross-Border Wealth Management Connect, and ETF Connect [2][3]. - Over the past decade, a comprehensive interconnection system has been established, covering stocks, bonds, asset management, and derivatives, which has broadened cross-border investment channels and solidified Hong Kong's status as an international financial center [2][3]. Bond Connect - The "Southbound Bond Connect" currently only allows qualified domestic institutional investors (QDII) and 22 public market operation banks to participate, suggesting a need to expand the eligibility criteria and increase the investment quota [3][4]. Stock Connect - Recommendations include relaxing asset requirements for mainland individual investors participating in the Hong Kong Stock Connect and increasing daily trading limits to enhance market liquidity [3][4]. ETF Connect - Since its launch in July 2022, the number of eligible Southbound ETF products is approximately 17, indicating room for further expansion [3][5]. Cross-Border Wealth Management Connect - It is suggested to expand the pilot program for Cross-Border Wealth Management Connect from first-tier cities to nationwide implementation, including more suitable products in the eligible range [4][5]. IPO Mechanism - A proposal to deepen the interconnection mechanism for IPOs includes the introduction of a "New Stock Connect" on a pilot basis, which could meet the asset allocation needs of mainland investors and attract more companies to list in Hong Kong [4]. New Channels for Interconnection - Beyond optimizing existing mechanisms, there is a need to explore new channels, such as including RMB stock trading counters in the Hong Kong Stock Connect to facilitate mainland investors [5][6]. Commodity Futures - The interconnection could also be expanded to include commodity futures, as there is interest from both international and mainland investors to participate in the commodity market [6]. Hong Kong's Role - Hong Kong is viewed as a crucial gateway for mainland China to the world, enhancing its role as a "super connector" and "super value creator" in the context of high-level market opening [7][8]. - The recent introduction of the "Renminbi Trade Financing Liquidity Facility" by the Hong Kong Monetary Authority highlights the growing acceptance of the RMB in global trade financing [7][8].