A spot bitcoin exchange-traded fund linked to bitcoin (BTC) is about to be approved in Hong Kong, one of the top global hubs and a point of entry for outbound Chinese investments.
According to Matrixport, a Singapore-based provider of cryptocurrency services, the investment vehicle has the potential to unlock up to $25 billion in demand from Chinese investors through the Soundbound Stock Connect program.
Matrixport expressed in a report Friday, “A likely approval of Hong Kong-listed Bitcoin Spot ETFs could attract several billion dollars of capital as mainland investors take advantage of the Southbound Connect program, which facilitates up to 500 billion RMB [HK$540 billion and $70 billion] per year in transactions.”
Matrixport continues, “Based on the (potential) available capacity, this might result in up to 200 billion Hong Kong dollars of available capacity for those HK Bitcoin ETFs—or US$25 billion.”
Through the Stock Connect, mainland Chinese investors can purchase Chinese stocks valued at HK$540 billion annually. As per 360MarketIQ, the flows during the last three years have been HK$450 billion, HK$400 billion, and HK$320 billion, which is HK$100 to HK$200 billion ($15 billion to $25 billion) less than the limit.
According to Matrixport, if the approval goes through without any problems, there could be a quota of between HK$100 billion and HK$200 billion available for Bitcoin ETF investment flows. The value of HK$200 is equal to $25 billion.
It is unclear as of this writing if mainland Chinese investors will be able to purchase the upcoming spot ETFs. Still, as the recent spike in Shanghai’s gold prices shows, mainland China appears to be interested in branching out into other assets.
Chinese yuan, also known as the renminbi, has lost almost 2% of its value against the US dollar, prolonging a two-year losing run, due to a slowdown in the economy and a declining trade surplus.
Matrixport stated, mentioning the Chinese central bank’s resumed gold investments, “China’s RMB is at a 17-year low vs. the USD. Indeed, there is a demand for diversification.”
In December, HKEX reported Stock Connect expansion to include Hong Kong-listed ETFs in July 2022. By mid-2023, six ETFs joined with an average daily turnover reaching HK$2.9 billion by September
Also Read: China Equity Funds Apply for spot Bitcoin ETFs in Hong Kong
