Overseas investors to pour $130 billion funds into mainland stocks via ETF connect in next 10 years – Goldman Sachs
STOCKS
Overseas investors to pour $130 billion funds into mainland stocks via ETF connect in next 10 years – Goldman Sachs
STOCKS

Overseas investors to pour $130 billion funds into mainland stocks via ETF connect in next 10 years – Goldman Sachs

 

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Overseas investors are expected to pour more funds into Chinese equities in the long term via the newly launched ETF Connect, according to Goldman Sachs.

Considering the small size of the first inclusions, ETF Connect plays a moderate role in capital flows in the short term, but it’s expected to bring $130 billion of northbound funds in the next 10 years as the coverage expands, the bank said. Northbound trading refers to buying and selling of mainland-listed equities via Hong Kong. The scale of southbound trading should reach $50 billion in a decade, it said.

The ETF Connect, which links bourses in mainland China and Hong Kong, was launched on July 4. The first batch included 83 mainland-listed ETFs and four Hong Kong-listed ones.

Passive investing is increasingly popular among global investors, but in China, most retail investors prefer to pick stocks themselves, Goldman Sachs said.

ETFs that track certain indexes or sectors account for only about 2% of the mainland market. If passive investing grows to the same level as active funds, namely making up 7% of the total market value of A-shares, passive funds should reach $800 billion, based on Goldman’s calculations.