E Fund launches first cross-market RQFII ETF
22 October 2013
Category: News, China, Hong Kong
By Toby Garrod and Hui Ching-hoo
E Fund Management (Hong Kong) launched the world’s first cross-market RQFII ETF, the E Fund CES China 120 Index ETF, on the Hong Kong Stock Exchange (SEHK) on October 21.
The RQFII ETF is a passively managed ETF that fully replicates and invests all of its assets proportionately across the 120 stocks underlying the CES China 120 Index (China 120). The product is being marketed as an efficient hedging tool for position-related risks.
Tseng Ko, managing director investment of E Fund Management (HK), notes that the investment objective of the ETF is to offer an investment return (before fees and expenses) that closely corresponds to the performance of the China 120. The China 120 consists of the 80 largest and most liquid A-shares in terms of market value trading on either the Shanghai or Shenzhen stock exchanges, as well as the 40 largest and most liquid SEHK-listed stocks of Mainland companies in terms of market value listed on the SEHK.
The E Fund CES China 120 Index ETF is the first cross-border ETF to express the "Greater China" concept, potentially boosting cooperation between stock exchanges in Hong Kong and Mainland markets. At present there are eight RQFII-ETFs on the Hong Kong market, all of which only invest in A-shares. Similarly, all of the cross-border ETFs on the Mainland market now only invest in H-shares. As the first ETF to invest in both the Mainland and Hong Kong markets, the E Fund CES China 120 Index ETF not only resolves issues caused by the different clearing systems across the A-share and H-share markets, but also works out currency exchange problems facing investors holding both RMB and HK dollar currencies.
The E Fund CES China 120 Index ETF is the latest RQFII product launched by E Fund Management (Hong Kong), following the launches of the E Fund RMB Fixed Income Fund, the E Fund CSI 100 A-share Index ETF, and the E Fund RMB China Bond Fund.
Core competiveness of the E Fund CES 120 Index ETF lies not only in its broader market exposure, but also lower volatility and outperformance compared to other similar indices, claims the firm. As of June 30, the 60-day volatility of China 120 was 20.97%, lower than the 24.34% of the CSI 300 Index and the 25.97% of the FTSE China A50 Index, E Fund noted in a press release. In addition, the China 120 has performed better than other A-Share Indices. According to Bloomberg, from January 1, 2010 to June 30, 2013, while the CSI 300 Index dropped by 42.3% and the FTSE China A50 Index dropped by 38.5%, the China 120 only dropped by 30.2%.
The fund performed fairly well on its first day of trading. The 3120.HK leg opened at the price of HK$12.00 and recorded a 6% increase by half-day trading. By market close yesterday, the closing price for 3120.HK was HK$12.82. The 83120.HK opened at 9.5 RMB and rose by 5.9% to 10.06 RMB by the close. By market close, the turnovers of 3120.HK and 83120.HK were HK$469,200 and 675,800 RMB, respectively.