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Asia ETF Roundup (Industry) – June 2019

MSCI to reclassify Kuwait to Emerging Markets; China drafted rules on funds’ securities lending; HK’s first active ETF launched.

Jackie Choy, CFA 03/07/19

For economic and market news relating to Asian ETFs, please refer to our “Asia ETF Roundup (Market) – June 2019”.

 

ETF Industry News

MSCI to Reclassify Kuwait to Emerging Markets
As part of its 2019 market classification review, MSCI announced it will reclassify the MSCI Kuwait Index to Emerging Markets status. The decision is subject to omnibus account structures and same National Investor Number cross trades being made available for international institutional investors before the end of November 2019. According to MSCI, assuming the above-mentioned market features are delivered, the inclusion of Kuwait into the Emerging Markets indices will take effect with the May 2020 semi-annual index review in a one-step process. The inclusion will add nine stocks with a proforma weight of 0.5% in the MSCI EM Index. The final decision will be announced by MSCI by the end of 2019.

Furthermore, MSCI launched a consultation on the reclassification of the MSCI Iceland Index to Frontier Markets and the results of the consultation will be released on or before 29 November 2019.

The detailed press release of the MSCI 2019 market classification review results can be found here.

CSRC Announced Draft Rules on Funds’ Securities Lending
On 21 June 2019, the China Securities Regulatory Commission (CSRC) released a set of draft rules allowing qualified onshore funds, including ETFs, to loan securities out from their portfolios to the China Securities Finance Corporation (CSF). Under the draft rules, an ETF can lend certain securities at an upper limit of 30% of its total holding of that security. The total amount lent out cannot exceed 30% of the fund’s total net assets.

Chinese Equity ETF Watch – HK-Domiciled Offshore Chinese Equity ETFs See Net Inflows of USD 328 million while Onshore Chinese Equity ETFs See Net Inflows of USD 76 million
• Hong Kong-domiciled ETFs in the China Equity Category saw estimated outflows of USD 328 million in June, coming mainly from the Hang Seng China Enterprises ETF (02828). Meanwhile, ETFs in the China Equity – A-Shares Category saw estimated outflows of USD 76 million.
• For the first half 2019, Hong Kong-domiciled ETFs in the China Equity Category saw estimated outflows of USD 0.8 billion, while ETFs in the China Equity – A-Shares Category saw estimated outflows of USD 1.7 billion.
• In the U.S. in June, there were no net flows estimated from the iShares China Large-Cap ETF (FXI) and the iShares MSCI China ETF (MCHI) and estimated USD 116 million of net inflows into the Xtrackers Harvest CSI 300 China A ETF (ASHR).

 

New Launches and Listings

ICBC CICC Listed Hong Kong’s First Active ETF
On 18 June, CICC listed Hong Kong’s first active ETF on the Stock Exchange of Hong Kong, with ICBC as the investment advisor of the fund. The ETF seeks to achieve a return in US Dollars in line with prevailing money market rates, with primary considerations of both capital preservation and liquidity by investing in short-term deposits and high quality money market investments.

This listing put the total number of ETF listings in Hong Kong at 201 (129 ETFs, 71 multiple counters, including 20 L&I Products).

KGI, Sinopac, Taishin Listed 5 Bond ETFs in Taiwan
On 10 June, KGI Securities listed three ETFs on the Taipei Exchange. These ETFs track the ICE 20+ Year AAA-AA US Large Cap Corporate Index, the Bloomberg Barclays US 15+ Year Investment Grade Corporate Select Index and the Bloomberg Barclays US 15+ Year Healthcare and Pharma Index, respectively.

On 13 June, Sinopac Securities listed an ETF on the Taipei Exchange. The ETF tracks the ICE BofAML 7-10 Year China Policy Bank Index.

On 14 June, Taishin Securities listed an ETF on the Taipei Exchange. The ETF tracks the Bloomberg Barclays US Banking 15+ Year Index.

These listings put the total number of ETFs listed in Taiwan at 195, of which 74 of them are bond ETFs.

Guotai Junan Allianz, Guotai, Fortune SG, CIB, China AMC, China Southern, E Fund, HuaAn Listed 8 ETFs in China
On 12 June, Guotai Junan Allianz and Guotai AMC listed two equity ETFs on the Shanghai Stock Exchange. These ETFs track the CSI Fully Semiconductor & Equipment Index and the CES Semiconductor Industry Index, respectively.

On 17 June, Fortune SG listed an ETF on the Shanghai Stock Exchange. The ETF tracks the CSI Medical Service Index.

On 24 June, CIB Fund Management listed an ETF on the Shanghai Stock Exchange. The ETF tracks the SSE Dividend Low Volatility Index.

On 25 June, China AMC, China Southern, E Fund and HuaAn Fund Management listed the first four Japan-China connect ETFs on the Shanghai Stock Exchange. Three of these ETFs track the Nikkei 225 Index and one of those tracks the TOPIX.

These listings put the total number of ETFs listed in China at 216 (59 ETFs on the SZSE, 157 ETFs on the SSE).

Samsung, KB, Hanwha Listed 4 ETFs in South Korea
On 5 June, Samsung Asset Management listed an ETF on the Korea Exchange. The ETF tracks the Morningstar Multi-Asset High Income 10% Capped Index.

On 20 June, KB Asset Management listed two ETFs on the Korea Exchange. These ETFs track the FnGuide Domestic Consumption PLUS Index and the FnGuide IT PLUS Index, respectively.

On 25 June, Hanwha Asset Management listed an ETF on the Korea Exchange. The ETF tracks the KOSPI Total Return Index.

These listings put the total number of ETFs listed in South Korea at 431.

ETFs Launched in June 2019 in the Asia ex-Japan Region

About Author Jackie Choy, CFA

Jackie Choy, CFA  

Jackie Choy, CFA is the Director of ETF Research for Morningstar Investment Management Asia