Shenzhen Stock Exchange (SZSE) and Singapore Exchange (SGX) are to establish a scheme linking their respective ETF markets.

The China-Singapore ETF Connect aims to link the ETF markets in Shenzhen and Singapore.

The China-Singapore ETF Connect was revealed as the two exchanges signed a memorandum of understanding (MOU) to enhance cooperation and boost cross-border investment.

Under the agreement, SZSE and SGX will jointly develop and promote the ETF markets in Shenzhen and Singapore through the listing of so-called ‘feeder’ ETFs which link locally listed ETFs to ones listed on the other exchange.

The scheme will allow ETF issuers in both countries to tap into cross-border capital flows, while also providing investors on both exchanges with a wider range of investment options.

Loh Boon Chye, CEO of SGX, commented: “The strong demand for ETFs in Asia underscores the region’s growing role as a global ETF hub, and we are excited about the manifold opportunities that this partnership could bring. This also marks our commitment in supporting China’s internationalization efforts. We look forward to working closely with onshore exchanges in strengthening the ETF markets in Singapore and China.”

Sha Yan, President and CEO of SZSE, said: “Under the MOU’s framework, SZSE and SGX will jointly prepare for the SZSE-SGX ETF link, promote cross-border product innovation and connectivity, and provide investors in China and Singapore with diversified, cross-border investment opportunities.”

As of 1 December 2021, SGX hosted 35 ETFs collectively housing more than S$12 billion (approx. $8.9bn) in assets, while SZSE reported 212 listed ETFs with a combined market capitalization of $39bn.

China has already established ETF Connects with Japan, Hong Kong, and Korea as the country moves to increasingly open up to international investors.