The Central Bank of Ireland has announced that it will allow Irish authorised UCITS and AIFs to acquire Chinese shares through the Shanghai-Hong Kong Stock-Connect programme (Stock Connect). The programme allows foreign investors to gain exposure to the previously hard to access China A-share market.
Stock Connect is a joint collaboration between Hong Kong Stock Exchanges and Clearing Limited and the Shanghai Stock Exchange. Stock Connect involves two central securities depositaries - Hong Kong Securities Clearing Company Limited (HKSCC) and China Securities Depository & Clearing Corporation Limited (ChinaClear).
The Central Bank is imposing certain conditions on access to Stock Connect including:
- The depository must satisfy itself that the manner in which the shares are to be held allows it to meet its legal obligations under UCITS/AIFMD rules and any conditions imposed by the Central Bank.
- The depositary (or its sub-custodian) must ensure that it retains control over the shares at all times.
- A broker of the fund that is a participant of HKSCC, but not a sub-custodian of the fund, will not satisfy the provisions of the relevant legislation.
- The depository (or its sub-custodian) must identify the level of participation in HKSCC, if any, which would be in line with its legal obligations as a depository. The levels of participation are: General Clearing Participant, Direct Clearing Participant or Custodian Participant.
- The depository must review and keep under review its Stock Connect arrangements to ensure that its legal obligations can be met.
The Central Bank has updated its UCITS and AIFMD Q&As to reflect the regulatory considerations around access to Stock Connect.
To view the updated UCITS Q&A, please click here.
To view the updated AIFMD Q&A, please click here.