According to a report by CoinDesk, Singapore-based cryptocurrency service provider Matrixport has stated that a Hong Kong Bitcoin spot ETF, which may be approved 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 released on Friday, Matrixport wrote, “Based on (potential) available funds, this could bring up to HKD 200 billion, or $25 billion, available to these Hong Kong Bitcoin ETFs.” This estimate is based on an optimistic assumption that the average total amount of unused Stock Connect annual quotas in 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 annually. However, according to data from 360MarketIQ, the capital flows in the past three years were HKD 450 billion, HKD 400 billion, and HKD 320 billion, respectively, differing from the quota by HKD 100 billion to HKD 200 billion (approximately $15 billion to $25 billion). Matrixport explained, “Interest in alternative assets.”
It is currently unclear whether the potential Hong Kong Bitcoin spot ETF will be open to mainland Chinese investors. Nevertheless, mainland China appears to be interested in diversifying 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 Chinese yuan against the US dollar has fallen by nearly 2%, continuing its depreciation trend of the past two years. Matrixport stated that the Chinese yuan’s exchange rate against the US dollar is at a 17-year low, 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, Boshi Fund Management’s Hong Kong subsidiary Boshi Fund (International) has applied to launch a Bitcoin ETF. Insiders have revealed that Harvest Global Investments and GF Holdings’ subsidiary Value Partners have also applied to launch similar products.”
Related reports: “Hong Kong financial regulatory department plans to launch the first batch of Bitcoin spot ETFs by the end of April.”
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