A South Korean trader
Exchange traded fund assets in South Korea have increased 41.5% over the past 12 months © EPA

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South Korea’s securities regulator has amended rules to allow domestic fund managers to offer Shanghai-listed exchange traded funds, paving the way for the implementation of the upcoming cross-border ETF link between the two countries.

Local fund groups can now register ETFs listed on the Shanghai Stock Exchange (SSE) for sale in South Korea, following an announcement by the Financial Services Commission last week.

Previously, only ETFs from OECD countries, Hong Kong and Singapore were permitted for sale in the country.

With the addition of China to the eligible countries in the current ETF framework, the regulator hopes local investors will invest more in foreign assets.

The Korea Exchange and the SSE agreed in May to establish the fund link scheme as a way to provide investors with greater access to the capital markets of both countries, mimicking China-Japan and mainland China-Hong Kong cross-border ETF links.

ETF providers believed to be working on forming partnerships include China’s Bosera Asset Management with South Korea’s KB Asset Management, while Seoul-based Samsung Asset Management is said to likely partner with Beijing-based CCB Principal Asset Management.

South Korea’s second-largest manager, Mirae Asset Global Investments, is also on the list of confirmed ETF issuers for the scheme.

The move also comes as the number of ETFs listed on the Korean bourse this year crossed the 500 mark for the first time since ETFs were introduced in the country in 2002.

In South Korea, ETF assets have increased 41.5 per cent over the past 12 months, from $37.41bn to $52.94bn as of May 12 this year, according to Morningstar data.

In China, ETF assets have ballooned 34.7 per cent from $93.52bn at the end of March 2020 to $126.01bn at the end of March this year.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignitesasia.com.

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