Since Hang Seng ETF is a cross-border product, the ETF shares bought on T Day can be sold on T+2, and the ETF shares bought on T Day can be redeemed at that time, which is different from domestic ETFs. However, because managers can buy and sell Hong Kong stocks in real time on T day, there is still a two-way arbitrage mechanism in the primary and secondary markets. ETF Fund Network gives several examples for reference:

(1)ETF discount premium arbitrage

If the ETF is discounted, that is, the price is lower than the net value, because the share bought on T day can be redeemed on T day, Hang Seng ETF has a redemption arbitrage mechanism. Specifically, investors buy Hang Seng ETF and redeem it, and fund managers sell portfolio securities in real time on T-Day in Hong Kong, which can lock in arbitrage income.

If the ETF has a premium, that is, the price is higher than the net value, because the ETF share subscribed on T+2 can only be sold, investors can arbitrage by holding a certain ETF share in advance and hedging the inventory risk with Hang Seng ETF. After the securities lending business is opened, investors can also borrow securities to complete arbitrage.

(2) Intra-day T+0 trading

Intra-day T+0 trading can be carried out through buy-redemption: after buying the Hang Seng ETF on T-day, if the Hang Seng Index rises, you can directly redeem the ETF to obtain the income brought by the rise of the Hang Seng Index. After opening the securities lending business, Hang Seng ETF can also conduct intraday T+0 or even short-selling transactions: after buying Hang Seng ETF on T, if Hang Seng Index rises, you can short-sell Huaxia Hang Seng ETF through securities lending to lock in the gains brought by ETF rise, and then repay the bonds at the Huaxia Hang Seng ETF bought daily at T+/kloc-0; If it is judged that the Hang Seng Index has fallen, you can first short the Huaxia Hang Seng ETF by securities lending, and then buy back the fund for redemption after the index falls.

(3)ETF event arbitrage

Due to the differences in holidays and trading hours between Shenzhen and Hong Kong, Hong Kong may be closed, but Hang Seng ETF can still be traded on Shenzhen Stock Exchange, which brings the opportunity of event arbitrage. For example, during this period, European and American markets rose sharply, but the price of Hang Seng ETF failed to effectively reflect the increase. Investors can buy Hang Seng ETF in advance and sell it after the opening of Hong Kong stocks, so as to gain the opportunity of event arbitrage brought by the rise of European and American peripheral markets.

In addition, investors can also carry out arbitrage operations such as "matching transactions with domestic ETFs" and "spot arbitrage" according to the actual situation.