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Asia ETF Roundup (Industry) –February 2018

Malaysia-Singapore trading link by end of the year; Constituent announced for the HSCEI enhancement; India restricts data to foreign exchanges for trading derivatives; Heavy net outflows for RQFII ETFs totaled Rmb 4.0 billion in February.

Jackie Choy 08/03/18

For economic and market news relating to Asian ETFs, please refer to our “Asia ETF Roundup (Market) –February 2018”.

ETF Industry News

Singapore and Malaysia Plans Trading Link by End of the Year
On 6 February, regulators from Singapore and Malaysia announced plans to link the Bursa Malaysia (BM) and the Singapore Exchange (SGX) by the end of the year. According to the Monetary Authority of Singapore, “the trading link will help lower trading costs for investors and encourage greater cross-border investments in the stocks listed on each other’s exchanges”. In addition, the partnership hopes to pave the way for future collaborations with other stock exchanges in ASEAN. However, specific arrangements have yet been revealed and the announcement did not explicitly mention whether ETFs would be included in the trading link. Currently there are 81 and 10 ETF listings on the SGX and the BM, respectively.

Hang Seng Indexes Releases Constituent Changes
Hang Seng Indexes announced the quarterly results of constituent changes in the Hang Seng Family of Indexes, which took effect on 5 March. Recall that in August 2017, the index provider announced to make enhancements to the Hang Seng China Enterprises Index (HSCEI) by adding 10 Red-chips and P-chips in 5 phases beginning from this review. The specifics are as follows:

  • Hang Seng Index
    • Removal of The Wharf (Holdings) (00004) due to the spin-off of the Wharf REIC (01997). Putting the total number of constituents back at 50.
    • Hang Seng China Enterprises Index
      • 10 Red-chips and P-Chips added with inclusion factor of 0.2 at this review, totaling 5.99% in weightings of the HSCEI.
        • Tencent (00700; 2.00%)
        • China Mobile (00941; 1.72%)
        • CNOOC (00883; 0.78%)
        • China Resources Land (01109; 0.31%)
        • CSPC Pharmaceutical (01093; 0.28%)
        • CITIC (00267; 0.24%)
        • Shenzhou International (02313; 0.20%)
        • Hengan International (01044; 0.19%)
        • China Gas (00384; 0.14%)
        • Guangdong Investment (00270; 0.12%)
  • 1 H-Share added: ZhongAn Online P & C Insurance (06060)
  • 1 H-Share removed: China Railway Construction Corporation Ltd. - H Shares (01186)
  • Total number of constituents is increased to 50.

 

Hang Seng H-Share Index ETF Changes Name to Hang Seng China Enterprises Index ETF
As a result of the above addition of Red-chips and P-Chips into the Hang Seng China Enterprises Index, the Hang Seng H-Share Index ETF (82828/02828) will change its name to “Hang Seng China Enterprises Index ETF”, effective from 5 March 2018.

India Exchanges Restrict Data Access to Move India Equity Futures Trading Onshore
On 9 February 2018, three Indian exchanges, namely the NSE, BSE, and MSEI, announced that they will no longer license Indian indexes and will restrict data access to Indian securities to foreign exchanges, offshore trading platforms, and index providers for trading or settling derivative products outside of India. It appears that this measure is intended to move India equity derivative trading back onshore.

The licensing restrictions will also prohibit index providers from sending data to third parties on indexes (with 25% or more in India equities) for trading or settling India equity derivatives on foreign exchanges. This will result in the discontinuation of certain derivatives, such as futures on the flagship Nifty 50 Index and the MSCI India Index, that currently trade on foreign exchanges.

As such, ETF portfolio managers will have to trade India equity futures via an offshore exchange in India that is a tax-free zone -- the Gujarat International Finance Tec-City, also known as GIFT City, or use successor derivative products for hedging and/or cash equitization for their Indian equity portfolios or holdings. They will also have to assess the effectiveness and costs of these alternative products.

Following the announcement, MSCI issued a press release that it may revoke India’s emerging-markets status on the basis that the new restrictions will make India less accessible to foreign investors. In this instance, India would no longer be represented in the MSCI Emerging Markets Index, and ETFs and index funds tracking this benchmark would then need to make corresponding changes.

 

RQFII ETF Watch – NetOutflows Totaled Rmb 4.0 billion in February

  • RQFII ETFs recorded estimated net outflows of Rmb 4.0 billion in February 2018 (11% of beginning AUM), which compares with net outflows of Rmb 0.3 billion in January. This puts YTD estimated net outflows from RQFII ETFs in Hong Kong at Rmb 4.4 billion.
  • Net outflows came mainly from the CSOP FTSE China A50 (82822/02822) and the ChinaAMC CSI 300 ETF (83188/03188), estimated at Rmb 2.9 billion and Rmb 0.8 billion, respectively.
  • The largest A-Share ETF by AUM in Hong Kong, iShares FTSE A50 China Index ETF (02823/82823), continued to experience heavy net outflows in February, estimated net outflows of Rmb 3.3 billion in February, followed the estimated net outflows of Rmb 3.6 billion in January. This puts YTD estimated net outflows from this ETF at Rmb 6.9 billion.

New Launches and Listings

iShares to Delist 1 ETF in Hong Kong
On 9 February, BlackRock Asset Management announced the delisting of the iShares MSCI China A International Index ETF (83162/03162) from the Stock Exchange of Hong Kong. Small net asset value and the relatively low trading volume were cited as reasons for the delisting. The last trading day on the exchange for this ETF was 2 March 2018.

Penghua Delists an ETF in China
On 14 February, Penghua Fund delisted an ETF that tracks the CSI 300 Index from the Shenzhen Stock Exchange.

China Life AMP Lists an ETF in China
On 7 February, China Life AMP Asset Management listed an ETF on the Shanghai Stock Exchange, which tracks the CSI 300 Index.

This listing put the total number of ETFs listed in China at 168 ETFs (53 ETFs on the SZSE, 115 ETFs on the SSE).

Yuanta, Cathay, Fubon Lists 7 Bond ETFs and a Dividend ETF in Taiwan
On 1 February, Yuanta Investment Trust listed 3 ETFs on the Taipei Exchange. They track the ICE U.S. Treasury 1-3 Year Bond Index, the Bloomberg Barclays US 20+ Year BBB Corporate Bond liquid index, and the Bloomberg Barclays China Treasury + Policy Bank 3-5 Year Bond Index, respectively.

On 7 February, Cathay Securities Investment Trust listed 3 ETFs on the Taipei Exchange, which tracks the Bloomberg Barclays US BBB Corporate bond ex China Coupon 4.5% 10Yr+ 20% Sector Capped Index    , Bloomberg Barclays EM USD Investment Grade ex China Coupon 5.5% 5Yr+ 10% Country Capped Index, and Bloomberg Barclays US High Yield ex China Cash pay 1-5 Year 2% Issuer Capped Index, respectively.

On 8 February, Fubon Asset Management listed 1 ETF on the Taiwan Stock Exchange and 1 ETF on the Taipei Exchange, which tracks the Dow Jones Taiwan High-Quality Dividend 30 Index and Bloomberg Barclays China Policy Bank Index.

These listings put the total number of ETFs listed in Taiwan at 116 (17 ETFs in TPEX and 99 ETFs in TWSE).

Mirae, Hanwha,Samsung, and KB List 7 ETFs in Korea
On 7 February, Mirae Asset, Hanwha Asset Management, and Samsung Asset Management listed 4 ETFs on the Korea Exchange. They track the MSCI Korea ESG Universal Capped Index, the F-LKTB Index, the MSCI Korea Country ESG Leaders Capped Index, and the MSCI Korea ESG Universal Index, respectively.

On 9 February, Mirae Asset listed an ETF on the Korea Exchange, which tracks the KOSPI 200 Covered Call ATM Index.

On 27 February, KB Asset Management listed 2 ETFs on the Korea Exchange. They track the C-KOSPI 200 LVHD-A Index(Price Return) and the KRX ESG Social Index, respectively.

These listings put the total number of ETFs listed in Korea at 328.

ChinaAMC Lists an ETF in Hong Kong
On 7 February, China Asset Management listed an ETF (83197/03197) on the Stock Exchange of Hong Kong. The ETF tracks the MSCI China A Inclusion Index which consists the A-Shares to be included in the MSCI Emerging Market Index.

This listing puts the total number of ETFs listed in Hong Kong at 174 (127 ETFs, 47 multiple counters, including 27 L&I products).

i-VCAP Lists an ETF in Malaysia
On 28 February, i-VCAP Management listed an ETF on the Bursa Malaysia. The ETF tracks the Dow Jones Islamic Market U.S. Titans 50 Index which consists of the 50 largest Shariah-compliant U.S. companies.

This listing puts the total number of ETFs listed in Malaysia at 10.

About Author Jackie Choy

Jackie Choy  

is the director of ETF Research for Morningstar Investment Management Asia