For insurers urgently seeking high-quality investable targets, the opening of Hong Kong Stock Connect ETFs has provided a new cross-border investment channel. Spurred by annualized financial returns exceeding 10%, the policy relaxation not only channels substantial incremental capital into Hong Kong stocks but also enables insurers to boost their overall returns by increasing allocations to Hong Kong equities.
According to information obtained from multiple sources, prior to the National Day holiday, the General Office of the National Financial Regulatory Administration issued a letter to several insurance companies titled "Letter on Clarifying the Regulatory Scope for Insurance Funds Investing in Hong Kong Stock Connect ETFs" (hereinafter referred to as the "regulatory scope letter"). Its contents indicate that insurance institutions permitted to invest in Hong Kong Stock Connect stocks under regulatory provisions may also invest in Hong Kong Stock Connect ETFs, following the relevant regulatory rules governing insurance funds' investment in Hong Kong Stock Connect stocks.
"We received this document, which means insurance funds have gained a new Hong Kong stock allocation channel for cross-border investment that does not consume QDII quotas, alleviating the anxiety around insurers going overseas. Moreover, amid a package of coordinated policies including long-cycle assessments, reduced risk factors, and capital replenishment, the opening of Hong Kong Stock Connect ETFs is not merely a loosening of a single tool but a critical component of insurers' response to low interest rates, resolution of the asset shortage, and reconstruction of their global allocation framework," a person in charge of cross-border investment at a large insurance asset management institution confirmed.
To date, more than one trillion yuan of insurance funds have invested in Hong Kong stocks through Stock Connect, achieving notably strong annualized financial returns. Authoritative data shows that in 2024, the annualized financial return on insurers' Hong Kong Stock Connect allocations was approximately 15%, and in 2025 the financial return was 11.9%, more than double the overall investment return rate for insurance funds.
A new cross-border allocation pathway
Multiple figures in the insurance asset management community believe the document issued by regulators is a "timely rain." This move not only optimizes the structure of insurance asset allocation and standardizes the behavior of insurance funds investing in Hong Kong Stock Connect ETFs, but also substantially relaxes the scale constraints on insurers' cross-border allocations without consuming scarce QDII quotas.
It is understood that the regulatory scope letter was issued and took effect on September 20. Earlier, on August 18 of this year, the National Financial Regulatory Administration had publicly expressed support for mainland insurance funds investing in Hong Kong Exchange-traded funds through the Shanghai-Hong Kong-Shenzhen Stock Connect. By September 23, Julia Leung, Chief Executive Officer of the Hong Kong Securities and Futures Commission, confirmed that mainland insurance funds had officially begun allocating to Hong Kong Stock Connect ETFs.
Hong Kong Stock Connect ETFs refer to ETF products listed on the Hong Kong Stock Exchange that have been included in the mutual market access mechanism between mainland and Hong Kong stock markets. Wind data shows that as of September 29, a total of 31 ETF funds had been included in the Stock Connect scope, all of which are equity funds covering broad-based, technology, dividend/high-yield, and cross-market strategies, with combined assets of 321.9 billion yuan. With insurers "entering the market," the scale of Hong Kong Stock Connect ETFs is expected to surge dramatically.
"The implementation of this policy is a continuation of regulators' steady liberalization of insurers' cross-border investment, not an ad hoc adjustment. From a timeline perspective, cross-border allocation by insurance funds has been steadily advancing over the past decade. In September 2016, the former China Insurance Regulatory Commission issued the 'Regulatory Scope for Insurance Funds Participating in the Shanghai-Hong Kong Stock Connect Pilot,' marking the first step for insurance funds to participate in Stock Connect pilot business and initiating Hong Kong Stock Connect investment. In June 2017, the former CIRC issued the 'Regulatory Scope for Insurance Funds Participating in the Shenzhen-Hong Kong Stock Connect Pilot,' bringing Shenzhen-Hong Kong Stock Connect into the scope of insurance investment. By July 2022, ETFs were formally included in the mutual market access mechanism between mainland and Hong Kong stock markets. However, at that time, insurance funds were not yet permitted to directly invest in Hong Kong Stock Connect ETFs. The implementation of this regulatory scope letter fills precisely this institutional gap," analyzed Fan Wenjun, head of a mid-sized insurance asset management institution in Shanghai, in an interview on October 9.
Insurance industry experts also hold an optimistic view on the implementation of the regulatory scope letter. Tian Lihui, a finance professor at Nankai University, believes that this policy will further enrich the cross-border investment toolbox for insurance funds, enhance the flexibility of asset allocation, help insurers use ETFs to gain one-click access to core Hong Kong assets, effectively diversify risks from fluctuations in the single A-share market, and greatly improve the flexibility of cross-border asset allocation. Zhu Junsheng, a postdoctoral researcher in applied economics at Peking University, pointed out that this policy will drive insurers' cross-border equity investment from "individual stock allocation" toward "portfolio allocation." Compared with directly investing in Hong Kong individual stocks, ETFs feature diversification, standardization, and high transparency, making them more suitable for institutional investors.
"The core significance of the regulatory scope letter is that it opens up the institutional channel for insurers to allocate to Hong Kong ETFs. Previously, insurers could only invest in individual stocks through Stock Connect or invest in Hong Kong ETFs through QDII—the former offered a single tool, while the latter was constrained by quotas. Against the backdrop of declining market interest rates, Hong Kong Stock Connect ETFs provide insurers with a richer set of cross-border allocation tools, allowing them to gain one-click access to core Hong Kong assets via ETFs. In addition, Hong Kong Stock Connect ETFs do not consume QDII quotas, resolving the long-standing quota bottleneck in insurers' overseas allocations. In the future, insurers' allocation framework may use Hong Kong Stock Connect ETFs as the standardized tool for core Hong Kong allocations, while using QDII to cover assets outside the mutual access list and other overseas market targets," Gao Yuan, a Hong Kong stock analyst at a leading securities firm, told reporters.
Attractive annualized financial returns from Hong Kong allocations
The reason insurance institutions have responded positively to the opening of Hong Kong Stock Connect ETFs is that over the past decade, Stock Connect has generated substantial financial returns for insurance funds. Available public data shows that as of now, total insurance industry assets have surpassed the 40 trillion yuan mark. In terms of equity allocations, as of the end of June this year, the combined balance of stocks and securities investment funds reached 6.39 trillion yuan, an increase of 690.7 billion yuan from the beginning of the year, rising to 16.23% of the total balance of funds utilized. However, the allocation share in overseas markets, especially the Hong Kong stock market, has rarely drawn attention.
Two documents—the "2024 Survey Results on Insurance Funds' Overseas Investment and Hong Kong Stock Connect Investment" and the "2025 Survey Results on Insurance Funds' Overseas Investment" published by the China Banking and Insurance Asset Management Association to the industry—show that in the past two years, insurance funds have gradually increased their overseas investment allocations, with financial returns significantly higher than overall investment returns.
Specifically, the 2024 survey results show that as of the end of 2024, mainland insurance companies' investment balance in the Hong Kong stock market was 810.5 billion yuan. Ninety-nine insurance companies invested in the Hong Kong market through Stock Connect, with a total scale of 762.2 billion yuan, and the average financial return on Hong Kong Stock Connect was approximately 15%, up 10 percentage points from the previous year. In 2025, the total scale of insurance funds' overseas investment reached 2,246.2 billion yuan, accounting for 5.4% of total insurance industry assets. As of the end of 2025, 37 insurance institutions conducted overseas investment in foreign currency with a balance of 90.129 billion US dollars, up 13.9% year-on-year, with a financial return of 5%. In addition, a total of 127 insurance institutions conducted Hong Kong Stock Connect investment business, with an investment balance of 1.61 trillion yuan at the end of 2025, up 112% year-on-year, and a financial return of 11.9%.
Gao Yuan believes: "It can be seen intuitively that, excluding the impact of exchange rate fluctuations, the financial returns Hong Kong Stock Connect brings to insurers are far higher than those from QDII and insurers' overall returns. If the appreciation of the renminbi over the past two years is factored in, the actual financial return on insurers' Hong Kong Stock Connect investments over the past two years would exceed 15%. There is only one underlying logic for opening up Hong Kong Stock Connect ETFs: under the dual squeeze of declining interest rates and asset shortage, 40.82 trillion yuan of insurance funds are reconstructing their allocation equation. Equity asset allocation continues to accelerate, becoming the core lever for insurers to enhance returns."
The two survey results further show that, in terms of investment scale, Hong Kong Stock Connect has become the main channel for insurance funds investing in Hong Kong stocks. A review reveals that in 2025, the scale of insurers' Hong Kong stock investment was 1.65 trillion yuan, a substantial increase of 112% from 762.2 billion yuan in 2024, of which 98% was achieved through Stock Connect and only 2% through QDII quotas. The proportion of Hong Kong Stock Connect investment balance in insurers' overall investment has also continued to climb, rising from 1.6% in 2023 and 2.1% in 2024 to 3.9% in 2025. The dual improvement in scale and returns has effectively driven overall overseas investment performance.
Liao Bo, chief macro analyst at Northeast Securities, pointed out that Hong Kong stock investment and global allocation hold important strategic significance for insurers, especially for their major asset allocation and risk parity strategies. In the current low interest rate environment, continuously and steadily carrying out global asset allocation is an effective way for insurers to diversify risks and enhance returns. Now that Hong Kong Stock Connect and Hong Kong Stock Connect ETFs are "advancing side by side," what impact this will bring to Hong Kong stocks and insurance funds is something the market may wait and see.
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