According to a report from CoinDesk, Matrixport, a Singapore-based cryptocurrency services provider, has stated that the potential approval of a Hong Kong Bitcoin spot ETF through the Southbound Stock Connect program could unleash a demand of up to $25 billion from Chinese investors. The Stock Connect program allows qualified mainland Chinese investors to access eligible stocks listed in Hong Kong.
In a report on Friday, Matrixport wrote, “Based on the potential available fund size, this could bring up to HKD 200 billion ($25 billion) available fund size to these Hong Kong Bitcoin ETFs.” This estimate is based on an optimistic assumption that the average total amount of the unused annual quota of the Stock Connect program over the past three years will flow into these spot ETFs.
The Stock Connect program allows mainland Chinese investors to purchase Chinese stocks worth HKD 540 billion ($68 billion) annually. However, according to data from 360MarketIQ, the fund flows over the past three years were HKD 450 billion ($57 billion), HKD 400 billion ($51 billion), and HKD 320 billion ($41 billion), with a discrepancy of HKD 100 billion to HKD 200 billion ($13 billion to $25 billion) from the quota. Matrixport explained that:
“Interest in alternative assets”
It is currently unclear whether the potential approved Hong Kong Bitcoin spot ETF will be open to mainland Chinese investors. Nevertheless, the mainland seems to be interested in diversified investments in alternative assets, as evidenced by the recent surge in Shanghai gold prices.
Against the backdrop of economic slowdown and shrinking trade surplus, the tightly controlled exchange rate of the renminbi against the US dollar has fallen by nearly 2%, continuing its depreciation trend of the past two years. Matrixport stated that the renminbi’s exchange rate against the US dollar is at its lowest point in 17 years, indicating a demand for diversified investments and pointing out the continuous purchase of gold by the People’s Bank of China.
Nick Ruck, COO of ContentFi Labs, stated that Chinese funds are very interested in issuing ETFs in Hong Kong. He told CoinDesk:
According to Nikkei Asia, Bosera Fund Management’s Hong Kong subsidiary, Bosera Funds (International), a large fund management company in China, has applied to launch a Bitcoin ETF. Insiders revealed that Harvest Global Investments and Value Partners, a subsidiary of GF Holdings, a Chinese securities firm, have also applied to launch similar products.
Related report: “Hong Kong’s financial regulatory department plans to launch the first batch of Bitcoin spot ETFs by the end of April.”
