ETFs, or exchange-traded funds, are a popular investment product in Hong Kong. A wide variety of ETFs holds different kinds of assets ranging from commodities to individual stocks and bonds. But how long do ETFs take to settle? What is the difference between buying and selling ETFs versus other products? We’ll explore how long it takes for an ETF order to settle in Hong Kong and other important information.
How It Works
When you place a trade on your brokerage account specifying an ETF, the funds necessary to buy/sell that specific security must be transferred from your bank account into your brokerage account before you can complete the transaction.
The actual transfer process depends on several factors, including the type of bank account and which brokerage company you are using. In most cases, your brokerage will send a request for funds transfer from your bank to the bank account within 24 hours after the transaction is executed. So, when you return online to see your new balance in your account, it should include both the amount sold or bought plus the transferred funds. However, before this period has passed, there is a risk that trade can exit before being settled.
One important thing to note about ETF trading in Hong Kong is that whether you buy or sell an ETF at market value, settlement happens four times per day during regular business hours Monday through Friday (only 3 days/weekend). The standard cutoff time is 16:45 on the day that settlement takes place.
If you are aware of this timeframe, you will know that it is still pending if your ETF order has not settled by then and may be subject to adjustment. If any problems occur with your bank account during the 24 hours after your initial trade, your transfer request may take longer than expected.
To avoid any issues, always make sure that your money is available in time for settlement before placing an order.
The exact process applies when you sell an ETF at market value through your brokerage in Hong Kong, but be aware of how this affects the sale price. Because market makers in Hong Kong must consider the amount of time it takes for transactions to settle when determining the price they are willing to pay or receive for an ETF. If you do not have your funds settled by 16:45 on Monday through Friday, it may result in a lower return than expected because you sell securities at a discount. After all, there is a risk involved with exposure to unsettled funds during that timeframe.
ETFs are not the only investment product affected by the settlement timeline, but they are certainly one of the most common types to buy/sell in HK. Although different brokerage companies have different policies regarding settlement timeframes, investors need to be aware of these issues when purchasing or selling ETFs.
The standard 4-day settlement timeframe allows investors plenty of time to make changes with orders. However, if orders are not settled due to circumstances beyond your control (such as bank account mistakes), there may be negative consequences that could reduce your return on investment.
Knowing this information before you execute an order will help you plan your transactions more efficiently and avoid any surprises with lacklustre returns during certain times of the year.
Exchange-Traded Funds (ETFs) are passively managed and open-ended funds that trade on the Hong Kong Exchange and Clearing Limited’s securities market. The Securities and Futures Commission (SFC) has certified all of the ETFs mentioned here as collective investment programs. ETFs with synthetic indexes are a type of intelligent investment. ETFs track the performance of their underlying benchmarks (for example, an index or a commodity such as gold), allowing investors to gain cost-effective exposure to a wide range of market themes. ETFs are investment vehicles that function similarly to stocks. Investors can buy or sell ETFs at any time during the market’s trading hours, just like other securities.
Keep these points in mind to prevent making swift judgments when greed works its way into your trading.