Luxembourg Fund Gets First Approval For Shanghai Stock Link

Luxembourg, home to equity funds with about $1.2 trillion of assets, gave its first approval to trade through the Shanghai-Hong Kong exchange link as international investors seek greater access to Chinese shares.

Luxembourg’s financial regulator granted the authorization to a fund yesterday, Patrick Hommel, a member of the secretariat general at the Commissionde Surveillance du Secteur Financier, said in an e-mailed reply to questions without naming the beneficiary. Funds domiciled in the country that aren’t yet invested in the Chinese market should refrain from using the link until they get regulatory approval, he said.

Overseas money managers have been working to finalize trading and compliance systems since Chinese authorities gave them a week’s notice for the program’s start date on Nov. 17. While foreigners bought the maximum daily amount of mainland shares allowed on the link’s debut, inflows have since slowed and Mirae Asset Global Investments (HK) Ltd. said last week it may take two months for more money managers to participate.

The Luxembourg approval is “super news,” said Kevin Rideout, head of execution services for Asia Pacific at Citigroup Inc. “This is a great first step toward unleashing some of the world’s wealth for the connect.”

About 95 percent of large funds aren’t ready to invest through the connect because of operational and compliance reasons, said Andy Maynard, the Hong Kong-based global head of trading and execution at CLSA Ltd. It will take about two months for managers to resolve all the issues, he estimated.