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Asia ETF Roundup (Industry) – August 2017

HSCEI enhancement proposal will add 10 Red-chips and P-chips from March 2018; RQFII ETFs net inflows estimated at Rmb 1.1 billion; Korea and Taiwan each added 9 new ETFs. 

Jackie Choy 07/09/17

For economic and market news relating to Asian ETFs, please refer to our “Asia ETF Roundup (Market) – August 2017”.

ETF Industry News

HSCEI Enhancement Proposal – Adding 10 Red-chips and P-chips
Recall that the Hang Seng Indexes proposed to enhance the Hang Seng China Enterprise Index (HSCEI) in March 2017 and in May 2017 it was announced that China Red-chips and P-chips would be eligible for inclusion in the HSCEI but without inclusion details. On 17 August 2017, Hang Seng Indexes announced that it will add 10 Red-chips and P-chips and the inclusion criteria. The specifics are as follows:

  • Number of constituents:
    • H-shares constituent in the index will remain as 40 and a total of 10 Red-chips and P-chips will be added to the HSCEI.
    • Total number of constituents in the index will increase from 40 to 50.
  • Selection criteria for Red-chips and P-chips:
    • Definition of P-chips – Companies that are not Red-chips or H-shares with more than 50% of their revenue (profits or assets if more applicable) from mainland China.
    • Additional eligibility screening for Red-chips and P-chips
      • Listing history: Three years for IPOs; or six years for companies listed through a backdoor listing.
      • Price volatility: The past one-month, three-month and 12-month historical price volatility of a potential constituent should not be greater than three times the historical price volatility of the HSCEI for the respective period.
      • Financial: Profits, net cash generated from operating activities and cash dividends must be greater than zero in the past three fiscal years.
  • Implementation:
    • Starting from March 2018, the 10 Red-chips and P-chips constituents will be added every quarter across five phases over a period of 12 months. The exact rebalancing dates will be disclosed in February 2018.
  • Indicative weighting:
    • Upon the end of the five phases, the 10 Red-chips and P-chips would account for 30.8% (based on 30 June 2017 data) of the HSCEI.
  • The Hang Seng Index’s website hosts the press release and the enhancement details.

 

RQFII ETF Watch – Net Inflows in August Totaled Rmb 1.1 Billion

  • RQFII ETFs recorded estimated net inflows of Rmb 1.1 billion in August 2017 (3% of beginning and ending AUM). This compares with net outflows of Rmb 0.7 billion in July. This puts estimated net inflows for the first eight months of 2017 from RQFII ETFs in Hong Kong at Rmb 2.0 billion.
  • The net inflows came mainly from the CSOP FTSE China A50 ETF (82822 & 02822), estimated at Rmb 1.5 billion while we noted net outflows from the ChinaAMC CSI 300 Index ETF (83188 & 03188), estimated at Rmb 0.4 billion.
  • The largest A-Share ETF by AUM in Hong Kong, iShares FTSE A50 China Index ETF (02823), recorded virtually no net inflows/outflows in the month of August. This compares with an estimated net outflow of Rmb 2.0 billion in July. For the eight months of 2017, we estimate total net outflows from the iShares FTSE A50 China Index ETF were Rmb 5.4 billion.

New Launches and Listings 

KB, Samsung, Mirae and Hanwha List 9 ETFs in Korea
On 1 August 2017, KB Asset Management listed an inverse ETF on the Korea Exchange tracking the inverse daily performance of the F-KOSDAQ 150 Index.

On 1 August 2017, Mirae Asset listed two ETFs tracking the Morningstar Global Upstream Resources Index and the Morningstar Exponential Technologies Index, respectively.

On 10 August 2017, Samsung listed an ETF tracking the S&P500 Dividend Aristocrats Covered Call (7.2% Premium) Index.

On 31 August 2017, Mirae Asset listed three ETFs tracking the KOSPI, KOSPI LargeCap and the KOSPI MidCap, respectively.

On 31 August 2017, Hanwha Asset Management listed an ETF tracking the WISE ESG Leading Company Index.

On 31 August 2017, KB Asset Management listed a leverage ETF tracking the 2 times daily performance of the F-KOSDAQ 150 Index.

The listing of these 9 ETF put the total number of ETF listings in Korea at 299.

Taishin, Fubon, Cathay and Fubon List 9 ETFs in Taiwan
On 10 August 2017, Taishin Securities Investment Trust listed three ETFs on the Taiwan Stock Exchange tracking the MSCI Taiwan Leveraged 2X Daily Index, the MSCI Taiwan Short Daily Index and the MSCI China Index, respectively.

On 15 August 2017, Fubon Investment Securities Trust listed an ETF tracking the FTSE Developed Europe Index.

On 17 August 2017, Cathay Securities Investment Trust listed two ETFs on the Taiwan Stock Exchange tracking the TIP TAIEX+ Low Volatility Select 30 Index and the S&P 500 Low Volatility High Dividend Index, respectively.

On 21 August 2017, Fuh Hwa Securities Investment listed three ETFs tracking the Bloomberg Barclays US High Yield 1-5 year ex China 500mln 10% Sector Capped Index, Bloomberg Barclays EM USD ex China Investment Grade 10 year 10% Country Capped Index and FTSE NAREIT Mortgage REITs Index, respetively.

The listing of these 9 ETFs put the total number of ETFs in Taiwan at 90, of which 43 are leveraged/inverse ETFs.

Harvest, Fortune, E Fund, Guotai And Huatai List 6 ETFs in China
On 3 August 2017, Fortune SG Fund Management listed an ETF on the Shanghai Stock Exchange tracking the CSI Banks Index.

On 7 August 2017, Harvest Fund listed an ETF on the Shanghai Stock Exchange tracking the FTSE China A50 Index.

On 11 August 2017, E Fund Management listed an ETF on the Shanghai Stock Exchange tracking the CSI All Share Index.

On 23 August 2017, Harvest Fund listed an ETF on the Shenzhen Stock Exchange tracking the Chinext Index.

On 24 August 2017, Guotai Asset Management listed a bond ETF on the Shanghai Stock Exchange tracking the 10-Year China Treasury Note Index.

On 28 August 2017, Huatai listed a money market fund on the Shanghai Stock Exchange.

The listings of these 6 ETFs put the total number of ETFs in China at 164.

List of ETFs Launched in August 2017

About Author Jackie Choy

Jackie Choy  

is the director of ETF Research for Morningstar Investment Management Asia