Greater Global Exposure with Southbound ETF Connect
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Southbound ETF Connect is becoming a platform for cross-border product innovation, with bespoke index design emerging as an increasingly important differentiator. Rule changes introduced by Hong Kong Exchanges and Clearing (HKEX) in July 2024 allow ETF benchmark indexes to include up to 40% securities outside the ETF Connect universe, creating new opportunities to combine Hong Kong Southbound securities with international exposures in a single index.1
This paper explores the opportunities these rule changes create for index design and illustrates how a common index construction framework can be applied across a range of investment objectives, from economic linkage and dividend strategies to healthcare, robotics & AI and biotechnology.
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1 Hong Kong Exchanges and Clearing Limited. 2024. “ETFs in Stock Connect: New Issuer Criteria, New Opportunities.” HKEX Insight, July 18, 2024.
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