Hong Kong Spot Bitcoin ETF Potentially Opens Demand of IDR 400 Trillion from Chinese Investors

Liputan6.com, Jakarta – Hong Kong, one of the world's leading financial centers and a gateway for Chinese outbound investment, will approve exchange traded funds (ETDs) tied to bitcoin (BTC).

Matrixport, a crypto service provider based in Singapore, assesses that this investment vehicle can open up demand of up to USD 25 billion, or the equivalent of IDR 400 trillion (exchange rate of IDR 16,000 per US dollar) from Chinese investors through the Southbound Stock Connect program.

The reason is, Southbound Stock Connect allows eligible mainland Chinese investors to access eligible shares registered in Hong Kong.

“Possible approval of a Hong Kong-listed Bitcoin Spot ETF could attract several billion dollars in capital as mainland investors take advantage of the Southbound Connect program, which facilitates transactions of up to RMB 500 billion (HK$ 540 billion and USD 70 billion) per year,” said Matrixport in a report quoted Yahoo Finance, Sunday (14/4/2024).

“Based on (potential) available capacity, this may result in available capacity of up to HK$ 200 billion for the HK Bitcoin ETF, or USD 25 billion,” added Matrixport.

This estimate is based on the calculated assumption that the average amount of unused Southbound Connect quota over the last 3 years will be channeled to spot ETFs.

Asset Diversification

The Stock Connect program allows mainland Chinese investors to snap up HK$540 billion worth of Chinese stocks annually. However, fund flows in the last 3 years amounted to HK$ 450 billion, HK$ 400 billion, and HK$ 320 billion, far below the limit of HK$ 100 to HK$ 200 billion (equivalent to USD 15-25 billion), according to data sources 360MarketIQ.

“Therefore, there is a potential remaining quota of HK$ 100 billion to HK$ 200 billion for bitcoin ETF investment flows, if approval occurs without any restrictions. HK$ 200 is equivalent to USD 25 billion,” explained Matrixport.

However, it is still unclear whether the upcoming spot ETF will be open to mainland Chinese investors. Despite this, mainland China is allegedly interested in diversifying into alternative assets, as evidenced by the recent surge in gold prices in Shanghai.

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