Taiwan, Hong Kong Exchanges To Begin Cross-Listing ETFs

by on June 26, 2009

Following months of back-and-forth efforts, Taiwan Stock Exchange executives indicated that the countries could begin cross-listing exchange-traded funds as soon as July. “About three Hong Kong-listed ETFs will be introduced to Taiwan investors soon,” said Michael Lin, a senior executive vice president of the Taiwan Stock Exchange. The move is the latest, and perhaps most meaningful, in a series of recent co-operations between the long-time rivals.

Over the last year, previously closed shipping routes have reopened, direct flights between Beijing and Taipei have been introduced, and Taiwan has proudly displayed two pandas, a gift from Chinawhose names spell “reunion,” at the Taipei Zoo. But the cross-listing of ETFs is a major step, allowing investors in both regions an opportunity to invest financially in the economic success of their neighbors. Hopefully, broad cross-investment between China and Taiwan, who have approached all-out war on several occasions in the past, will discourage armed conflicts in the future and further align the interests of these developing economies.

The first ETF listed in Taiwan will likely track the CSI 300 Index, a market cap-weighted benchmarktracking the performance of 300 stocks listed on the Shanghai and Shenzhen Exchanges. Once China and Taiwan sign a financial memorandum of understanding (which could occur in July), it is hoped that cross-listing of Taiwan ETFs will expand to the Shanghai and Shenzhen Exchanges as well.