An ETF that tracks bitcoin and can be bought on the Hong Kong stock market is close to being authorized. Hong Kong, known as a major international financial center and popular destination for Chinese investors looking to put money abroad, will host this exchange-traded fund.
Based on Matrixport’s announcement, the cryptocurrency investment product could draw in approximately $25 billion of interest from Chinese investors through Soundbound Stock Connect.
Matrixport stated in a report on Friday that the anticipated approval of Bitcoin Spot ETFs listed in Hong Kong could draw in numerous billions of dollars from mainland investors. This is due to the Southbound Connect program, which enables up to 500 billion RMB (approximately HK$540 billion or $70 billion) worth of transactions each year.
Matrixport explains that the potential capacity could support approximately 200 billion Hong Kong dollars (equivalent to US$25 billion) for Bitcoin ETFs in Hong Kong.
According to 360MarketIQ, Chinese investors via Stock Connect have bought approximately HK$450 billion, HK$400 billion, and HK$320 billion worth of Chinese stocks in the past three years. This falls short of the annual limit by around HK$100 to HK$200 billion ($15 billion to $25 billion). In simpler terms, Chinese investors have purchased less than the maximum allowed value of Chinese stocks through Stock Connect in the previous three years.
Based on Matrixport’s announcement, if the approval process is successful with no hiccups, approximately $25 billion to $50 billion could be accessible for investing in a Bitcoin ETF.
At present, it’s uncertain whether mainland Chinese investors can buy the forthcoming gold ETFs. However, the surge in gold prices in Shanghai indicates that China may be exploring options in diversifying its investments.
The Chinese currency, referred to as the yuan or renminbi, has dropped nearly 2% in value relative to the US dollar, marking the continuation of a two-year downward trend. This depreciation can be attributed to economic deceleration and a diminishing trade surplus.
Matrixport expressed that with the Chinese central bank’s renewed gold purchases, “The value of China’s currency, the RMB, is at its lowest point against the USD in the past 17 years. As a result, there is a growing interest in diversifying investments.”
In December 2021, the Hong Kong Exchanges and Clearing (HKEX) announced that Stock Connect would extend to include Hong Kong-listed Exchange-Traded Funds (ETFs), starting in July 2022. By the middle of 2023, a total of six ETFs had joined this program, with an average daily trading volume of approximately HK$2.9 billion reached by September.
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2024-04-12 14:31