ETF CONNECT – BRAZIL AND CHINA | B3

ETF CONNECT

The ETF Connect is part of the mutual market access program, which China aims to enhance the connectivity and expand cross-border investment. A mechanism aiming to expanding investment opportunities through the reciprocal listing of ETFs between China and the participating countries. Initially, the program includes equity ETFs, allowing ETFs referenced to Chinese Equity indices to be listed on B3, while also enabling the listing of ETFs that track the B3 Ibovespa index in China.

For more information about ETFs: https://b3.com.br/en_us/products-and-services/trading/equities/stock-exchange-traded-fund-stock-etf.htm

Timeline:

  • 2014: Initial discussions between the Chinese and Brazilian markets.
  • 2018: Roadshow and project presentation for Brazilian asset managers.
  • 2024: Signing of MoUs between regulators (CVM and CSRC).
  • 2024: Signing of MoUs between Brazilian and Chinese asset managers.
  • 2024: Ibovespa licensing agreement with Chinese asset managers.
  • 2025: MOU signatures between Shanghai and Shenzhen Stock Exchange.
  • Next steps: Project operationalization and official listing of the ETFs in Brazil and China.

The initiative was also made possible through the agreement between the Securities and Exchange Commission of Brazil (CVM) and the China Securities Regulatory Commission (CSRC). In 2024, following the series of MoUs, the Brazilian stock exchange (B3 – Brasil, Bolsa, Balcão), along with the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) in China, formalized agreements to enable the connectivity of exchange-traded funds (ETFs) between the two countries.

China already has over 30 ETFs launched in similar partnerships with other Asian markets such as Japan, Singapore, and Hong Kong. Brazil is the first country outside the continent to make the ETF Connect possible.

  • Advantages
    • Eligible ETFs enjoy cross-border trading without being subject to dual regulation.
    • Facilitates ETF offerings focusing on Brazilian and Chinese assets.
    • Connects ETFs between Chinese and Brazilian stock markets for broader access.
    • Promote diversified investment strategies to mitigate risks.
    • Enhance portfolio growth opportunities through increased asset classes.
  • Eligibility
    • Only equity Index ETFs that follow the characteristics of the local market are eligible.
    • ETF issuers must comply with the specific regulatory rules of each country, such as the QFII and RQFII rules (https://english.sse.com.cn/access/qfiirqfii/introduction/) in China and the local CVM rules in Brazil.
    • ETF issuers must enter into business agreements with the issuers of the target ETFs, detailing that the ETF will invest more than 90% of its assets in a target ETF listed on the corresponding exchange (SSE/SZSE or B3), with the issuers of the target ETF listed on the same exchange, and develop the ETF for the market operated by the other exchange based on this agreement.
    • Issuers are recommended to conducting prior consultation with the home exchange before taking further steps with their targed counterparties.
  • Listed ETFs
    Code Name Fund Management Listing Date
    PKIN11 B-INDEX ETF CONNECT CHINA UNIVERSAL CSI 300 FUNDO DE ÍNDICE BANCO BRADESCO S.A. 2025/05/27
    TECX11 B-INDEX ETF CONNECT CHINA AMC CHINEXT FUNDO DE ÍNDICE BANCO BRADESCO S.A. 2025/05/27
  • Trading

    To be eligible for trading, it must be listed via ETF Connect. The rules and definitions follow the standard set for the product on the respective exchanges.

  • Marketing and Communication

    The communication definitions for ETFs in the Brazilian market must comply with the guidelines established in Annex V of CVM Resolution 175 and the ANBIMA Guide for Advertising and Disclosure of Technical Material for Investment Funds.

    Electronic Page

    Index funds (ETFs) are required to maintain a publicly accessible electronic page containing updated information about the fund. This page must include, at a minimum:

    • Fund regulations;
    • Financial statements;
    • Audit reports;
    • Periodic and occasional information required by CVM.

    This information must be updated regularly to ensure transparency and accessibility of data to investors.

    Disclosure of Periodic Information

    ETFs must disclose periodic information, including financial statements and audit reports, at regular intervals. This information must contain detailed financial data, such as:

    • Balance sheets;
    • Income statements;
    • Cash flow statements.

    All this information must be available on the fund's electronic page and be accessible to the public.

    Disclosure of Occasional Information

    Any relevant information must be disclosed immediately after the fact is known, ensuring that investors are always informed about important changes.

    Disclosure Material

    The disclosure material for ETFs must be prepared clearly and objectively, highlighting the main aspects of the fund. It must include information about:

    • Investment policy;
    • Risks involved;
    • Historical performance of the fund.

    The manager is responsible for preparing and updating the disclosure material, ensuring the accuracy and veracity of the information.

    Advertising and Disclosure Rules

    Advertising and disclosure of technical material must be aligned with the prospectus, regulations, and other documents of the investment fund. It is prohibited to:

    • Ensure, promise, or suggest the existence of guaranteed future results or risk exemption for the investor;
    • Establish unjustified qualifications;
    • Use unproven superlatives;
    • Present opinions or forecasts without a technical basis.
  • Income Tax Rate

    In Brazil, the taxation of equity ETFs consists of a fixed rate of 15% on the investor's capital gains, regardless of the investment period. In day trading operations with equity ETFs, the net gain is taxed at a rate of 20%, with a 1% withholding tax on Income Tax.

    In China, the ETF Connect program offers tax exemptions for qualified foreign institutional investors (QFIIs and RQFIIs) on capital gains obtained from trading ETFs in the Chinese market. This means that investors can trade ETFs without incurring capital gains taxes.

  • Educational - Market Information of SSE an SZSE Index Series and Stocks Listed