ETF markets in China and HK set for growth, says Morningstar
16 November 2012
News, Asia, China, Hong Kong
By Hui Ching-hoo
Fund consultancy Morningstar holds a positive view on the ETF markets in Hong Kong and China in view of their diversifying product bases. The markets rose 26% and 130% for the first ten months of this year, respectively.
Morningstar Asia ETF Strategist Jackie Choy tells Asia Asset Management that there were 32 new ETF funds listed in Hong Kong through October this year. This lifted total AUM to US$29 billion from $23 billion at the beginning of the year. Meanwhile, the ten ETF debutants in the A-share market boosted the total AUM of Mainland ETFs to $23 billion from $10 billion.
The spike in total AUM of China ETFs was mainly attributable to the launches of two cross-market ETFs, Huatai-PineBridge CSI 300 ETF and Harvest CSI 300 ETF, which replicate the performance of 300 stocks traded in both in Shanghai and Shenzhen stock exchanges, he says. The products provide investors with effective tools for hedging. Combined, the products account for 35% of the total market valuation.
In Hong Kong, the four RQFII ETFs issued by China AMC, Harvest, E Fund, and CSOP were considered the key drivers. The size of the RQFII ETF market is expected to further grow following the news that China’s State Council has given the green light to the China Securities Regulatory Commission (CSRC) and the State Administration of Foreign Exchange (SAFE) to up the RQFII scheme’s total quota from the current 70 billion yuan (US$11.1 billion) to 270 billion yuan.
Mr. Choy believes that an increasing numbers of Chinese fund managers are looking to issue RQFII ETFs. “The four RQFII ETFs track benchmark A-share indexes such as the CSI 300 and the FTSE China A50, so the newcomers will not use the broad based indexes to compete head-to-head with the existing players. We expect the spectrum of RQFII ETFs will be further diversified to track various industrial sectors. Gold ETFs, for example, are expected to have plenty of room to grow in China.”
Mr. Choy concludes that he sees no evidence of capital switching from synthetic A-share ETFs to the physical RQFII ETFs, saying the two types of A-share ETF products can co-exist.
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