Hong Kong's Securities and Futures Commission is studying applications for three more yuan-denominated exchange traded funds, signalling further relaxation of China's capital markets.

Hong Kong's Securities and Futures Commission is studying applications for three more yuan-denominated exchange traded funds, only a fortnight after the first was launched, said a report in the South China Morning Post. 

The yuan ETFs will allow Hong Kong investors to bet on a basket of mainland stocks, a move which follows the announcement of the five billion yuan (US$782 million) fund issued by China Asset Management earlier this month. The three new ETFs are expected to be around the same size as the former, and give access to the best equities on the Shanghai and Shenzhen stock exchanges. 

The new product underlines a push by China's government to bring more overseas investment into its market which has been amongst the world's worst performers in the last two years. 

The Shanghai Composite Index has increased just 1.1 per cent so far this year, while more than a third of retail investors lost over 30 per cent of their investment in Mainland stocks in the first half of the year, according to a recent poll.

Critics have said this is not a good time to launch a product investing in Mainland stocks as the market is underperforming. A spokesperson for the SFC was cited in the article warning of the risks, as the yuan is not yet fully convertible. 

The mainland market is still relatively closed to foreign flows, and investment is only officially possible through the two qualified foreign institutional investor schemes.