Korea Exchange (KRX) on the 31st said it agreed with HSIL to develop joint indexes composed of representative and major corporations from Korea and Hong Kong and unveiled a total of four indexes.
The joint indexes use the representative indexes of Korea and Hong Kong, as well as semiconductor and bio theme indexes, and are designed to allow global investors to invest simultaneously in the two countries' listed companies.
The HSIL–KRX joint indexes were developed by combining a Hong Kong index at 65% and a Korea index at 35% using an index-to-index combination method. To meet the ETF Connect requirement that eligible Hong Kong stocks account for at least 60% within the index, they plan to maintain the 65-to-35 weighting through monthly rebalancing.
The joint indexes consist of one Korea–Hong Kong representative index and three joint indexes that each combine major theme indexes such as tech and bio.
According to the exchange, the representative indexes of Korea and Hong Kong have recently shown sharp gains, and overseas investment demand via Hong Kong has increased among global investors, including those in mainland China. Last year, the KOSPI rose about 75.6% for the year, and the Hang Seng Composite Index climbed 27.8%.
Accordingly, the exchange said it is necessary to respond to rising demand to invest in the Korean market by supplying Korea–Hong Kong joint indexes that satisfy the ETF Connect requirements.
"If ETFs based on the joint indexes are listed in Hong Kong, they are expected to help improve global investors' access to Korea's stock market," the exchange said, adding, "The exchange will support the development and listing of ETFs based on the joint indexes with HSIL and local asset management firms, and based on the joint index development partnership between the two sides, will continue to supply new theme index series where there is global investor demand."