Hong Kong Bitcoin ETFs Poised to Draw $25 Billion via Stock Connect

Hong Kong, one of the world’s leading financial centers and China’s gateway for foreign investment, has approved a spot Bitcoin exchange-traded fund linked to Bitcoin (BTC).

Matrixport predicts massive investor influx

The potential approval of Bitcoin Spot Exchange-Traded Funds (ETFs) in Hong Kong might catalyse significant investment flows from mainland China. This interest stems from the utilisation of the Southbound Stock Connect program, designed to enable mainland Chinese investors to engage with shares listed in Hong Kong.

Matrixport, a Singapore-based crypto services provider, speculates that the approval could harness an investment wave of several billion dollars. The programme, which presently accommodates transactions up to 500 billion RMB annually (equivalent to $70 billion), could see a substantial portion diverted to these ETFs. "A likely approval of Hong Kong-listed Bitcoin Spot ETFs could attract several billion dollars," Matrixport outlined in a recent report.

Despite the generous annual quota, historical utilisation rates have not reached the maximum, highlighting a consistent shortfall of between HK$100 billion to HK$200 billion each year. These figures suggest an available channel for up to $25 billion into Bitcoin ETFs, assuming no regulatory barriers impede the flow.

Source:360miq.com

The Stock Connect program itself permits an annual investment of HK$540 billion in Chinese stocks by mainland investors. However, the actual investments over the past three years have tallied HK$450 billion, HK$400 billion, and HK$320 billion, respectively, falling below the cap and indicating potential for redirection towards Bitcoin ETFs.

China's Shift to Diversified Assets Amid Economic Slowdown

In a marked shift towards diversified investment options, mainland China demonstrates increasing interest in alternative assets. This trend aligns with the recent spike in gold prices observed in Shanghai. Amidst an ongoing economic deceleration and a diminishing trade surplus, the Chinese yuan has depreciated almost 2% against the U.S. dollar. This extends a two-year period of weakening, underscoring the urgency for investment alternatives.

Matrixport, a notable financial institution, commented on the situation, "China’s RMB is at a 17-year low vs. the USD. Indeed, there is a demand for diversification." This observation is supported by the Chinese central bank's strategy to continue accumulating gold reserves, thereby broadening its investment spectrum.

Furthermore, Nick Ruck, COO of ContentFi Labs, highlighted a growing enthusiasm within mainland investment funds towards the establishment of spot bitcoin Exchange-Traded Funds (ETFs) through their subsidiaries in Hong Kong. Ruck shared, "Mainland-based funds have been applying to issue spot bitcoin ETFs through their Hong Kong subsidiaries. If approved, this could allow qualified mainland investors greater access to bitcoin."