Four Years of Connectivity: Southbound Insurance Funds Inject Fresh Momentum into Hong Kong’s ETF Market

Four years – as of last month – since exchange-traded funds (ETFs) were added to Stock Connect, the period may seem brief, yet it has been enough for what began as an institutional innovation and exploration to grow into a mainstay of cross-boundary asset allocation by investors in Hong Kong and the Mainland.

Two days earlier on 18 August, the market welcomed news of another positive development from the National Financial Regulatory Administration (NFRA), announcing its active support for Mainland insurance funds to participate in the mutual access schemes connecting the Mainland and Hong Kong financial markets. The regulator also pledged to support Mainland insurance institutions’ investments in Hong Kong-listed ETFs via Stock Connect, providing such insurance funds broader asset allocation options while injecting fresh, long-term momentum into the next stage of development of Hong Kong’s ETF market.

Wider product diversity to boost market vitality

ETFs have gained traction rapidly because of their inherent convenience, transparency and cost-effectiveness. For investors, a single ETF can provide exposure to a market, an industry, and even an overarching thematic strategies. For the market, ETFs serve as an important vehicle for facilitating asset allocation, enhancing liquidity and driving product innovation.

Given Hong Kong’s ongoing efforts to develop its ETF market in recent years, the ETF ecosystem has become increasingly comprehensive. At present, there are over 220 ETFs listed in Hong Kong, spanning equities, fixed income, commodities, multi-assets and thematic strategies. Investors can therefore optimise their asset allocations to align with their risk appetites and investment goals.

Hong Kong’s edge as an international market is equally evident in the ETF sector. Currently, the city features eight cross-boundary ETFs tracking overseas markets, with their combined assets under management (AUM) exceeding HK$13 billion. Active ETFs have demonstrated parallel momentum. Hong Kong now hosts over 40 active products with a total AUM surpassing HK$113 billion, representing a more than three-fold increase year-over-year. These metrics reflect that both issuers and investors are increasingly valuing the potential and utility of the Hong Kong ETF market.

Rising liquidity reflects market depth

Undeniably, a broader product spectrum can attract more active market trading. During the first seven months of 2026, the average daily turnover (ADT) of the Hong Kong ETF market reached approximately HK$40.6 billion, representing a 22% year-on-year increase and accounting for over 14% of the equity market’s total turnover.

Beyond a simple rise in trading volume, this development signals a broadening of market depth and investor participation. Higher liquidity within the ETF market enhances flexibility of market entry and exit for investors, thereby opening up greater avenue for product innovation and fostering a virtuous cycle. After years of development, Hong Kong has emerged as one of Asia’s most internationalised, innovative and vibrant ETF markets.

No market can sustain its expansion by relying solely on existing products without a steady capacity to innovate. In recent years, the Hong Kong Exchanges and Clearing Limited (HKEX) has been expanding its index ecosystem. Building on the momentum of the HKEX Tech 100 Index launch, HKEX debuted new cross-market indexes this year covering the US, South Korean and Malaysian markets. These benchmarks provide a more robust foundation for future ETF product design, empowering investors to capture the growth opportunities in the Asian and global technology sectors via the Hong Kong market.

Connectivity: from products to capital

The significance of mutual access for ETFs has never been merely about expanding the tradeable product range, but more importantly, about forging closer connections between Hong Kong and the Mainland in terms of capital, investors, and market mechanisms.

As of July 2026, the number of total eligible ETFs for northbound and southbound trading stood at 365 and 31, respectively, posting an ADT of approximately RMB 5.1 billion and HK$5.8 billion during the first seven months of the year. This reflects the demand among Mainland investors for Hong Kong-listed products, and underscores the growing role of ETF Connect as a cross-boundary investment channel.

The NFRA’s support for Mainland insurance institutions investing in Hong Kong ETFs through Stock Connect marks a pivotal milestone in deepening mutual access for ETFs. Insurance funds feature an investment profile defined by long investment horizons, substantial scale, and a prudent asset allocation mandate. The injection of such long-term institutional capital will strengthen Hong Kong’s capital base and stimulate product demand, thereby propelling the further development of the city’s asset management industry.

In recent years, Mainland insurance funds have continued to scale up their allocations to the Hong Kong market, evolving into a vital cornerstone of the city’s institutional investment landscape. The latest policy breakthrough empowers these institutions to tap into Hong Kong’s ETF market through highly convenient and efficient channels. This signifies the new stage of the ETF mutual access arrangement that goes beyond merely expanding product coverage towards deepening institutional participation and facilitating long-term asset allocation.

Harness our “super” advantages

The steady development of Hong Kong’s ETF market and the mutual market access mechanism exemplify the unique and irreplaceable financial advantages Hong Kong enjoys under “One Country, Two Systems”. Hong Kong is both a “super connector” linking the Mainland and the world, and a “super value-adder” creating value.

Looking ahead, the Financial Services and the Treasury Bureau will continue to work closely with regulators, HKEX, and the industry to broaden product choices, enhance market liquidity, and deepen connectivity with the Mainland’s financial markets. We are confident that Hong Kong’s ETF market will channel Mainland and global capital more effectively, injecting sustained momentum into consolidating and enhancing Hong Kong’s status as an international financial centre.

20 August 2026