Asia ETF Roundup (Industry) – February 2021

The Hang Seng Index is scheduled for a major renovation.

Jackie Choy, CFA 09.03.2021
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For economic and market news relating to Asian ETFs, please refer to our “Asia ETF Roundup (Market) – February 2021”.

ETF Industry News

Hang Seng Index Consultation Results – Constituents will ultimately increase to 100 Along with Other Enhancements

On 1 March, Hang Seng Indexes revealed the results of the consultation on proposed enhancements to the Hang Seng Index. Here is a summary of the changes which will become effective as of the index’s scheduled June 2021 rebalancing:

  • The number of constituents will ultimately increase to 100
    • Increase to 80 by mid-2022 from the current 52 (Hang Seng had previously announced it would be increased to 55 on 15 March)
    • The number of constituents will ultimately increase to 100, but no timeline for this step was given
  • Selecting HSI constituents across 7 industry Groups
    • Targeting no less than 50% market cap coverage for each of the 7 industry groups
    • The 7 industry groups are (1) Financials (2) Information Technology (3) Consumer Discretionary & Consumer Staples (4) Properties & Construction (5) Telecom & Utilities (6) Healthcare and (7) Energy Materials Industrials and Conglomerates
  • Relaxing the listing history requirement
    • Constituents’ listing history requirement will be shortened to 3 months
  • Maintaining the representation of Hong Kong companies
    • A minimum of 20-25 constituents will be HK companies
  • Adopting a weighting cap of 8% on all HSI constituents
    • Current cap at 10% (or 5% for weighted voting rights and/or secondary-listed constituents)

 

 

These changes will make the Hang Send Index more representative of the Hong Kong stock market. Hang Seng Indexes illustrated that the market coverage of the Hang Seng Index will increase to 71% of the total market capitalization of Hong Kong-listed stocks from 57% today, once the index has folded in 80 constituents. However, the simulated total weight of Hong Kong companies, according to Hang Seng Indexes, will be reduced to 33.1% from 41.5% at that point. The detailed consultation result can be found here.

Updates on the U.S. Executive Order – MSCI No Decisions Yet on Companies in Tranche 5

On 14 January 2021, the U.S. Department of Defense released a list of 9 additional Communist Chinese military companies (Tranche 5), including Xiaomi Corporation. On 23 February, MSCI stated that as the Office of Foreign Assets Control (OFAC) has not included any companies listed in Tranche 5 on its Non-SDN List of companies subject to the Executive Order or provided any guidance with respect to Tranche 5, MSCI will seek to issue an announcement by 10 March to confirm any potential deletion of securities related to Tranche 5. The announcement can be found here.

Chinese Equity ETF Watch – Hong Kong-Domiciled Onshore Chinese Equity ETFs See Estimated Net Outflows of USD 0.3 billion

  • Hong Kong-domiciled ETFs in the China Equity Category saw small net inflows, estimated at USD 12 million in February. Net inflows from the Global X China Electric Vehicle ETF (02845/09845), estimated at USD 105 million were partly offset by net outflows from the Hang Seng China Enterprises Index ETF (02828/82828), estimated at USD 75 million.
  • Hong Kong-domiciled ETFs in the China Equity - A-Shares Category saw estimated net outflows of USD 330 million in February, coming mainly from the iShares FTSE A50 China ETF (02823/82823), and CSOP FTSE China A50 ETF (02822/82822) which recorded net outflows estimated at USD 130 million and USD 99 million, respectively.
  • Hong Kong-domiciled ETFs in the China Equity Category and the China Equity – A-Shares Category saw estimated year-to-date outflows of USD 0.4 billion and USD 0.2 billion, respectively.
  • In the U.S. in February, we estimated net outflows of USD 0.4 billion from the iShares China Large-Cap ETF (FXI) and the iShares MSCI China ETF (MCHI). We estimated net inflows of USD 0.2 billion from the Xtrackers Harvest CSI 300 China A ETF (ASHR).

flows

New Launches and Listings

China: 19 ETF New Listings

  • Chinese ETF providers listed 19 new ETFs on the Shanghai Stock Exchange and the Shenzhen Stock Exchange. Fifteen of these ETFs are thematic/sector ETFs, 3 of these are broad market ETFs and 1 is a strategic-beta ETF.
  • These listings put the total number of ETFs listed in China at 402 (121 ETFs on the SZSE, 281 ETFs on the SSE).

 

Hong Kong: 1 ETF New Listing

  • CSOP Asset Management listed an ETF on the Hong Kong Exchange, tracking the SSE Science and Technology Innovation Board 50 Index.
  • These listings put the total number of ETFs listed in Hong Kong at 226 (142 ETFs and 84 multiple counters, including 24 leveraged/inverse products).

 

South Korea: 4 ETF New Listings

  • Korean ETF providers listed 4 carbon efficient ETFs on the Korea Exchange.
  • These listings put the total number of ETFs listed in South Korea at 473.

 

Taiwan: 3 ETF New Listing

  • Taiwan ETF providers listed one dividend ETF on the Taiwan Stock Exchange and two bond ETFs on the Taipei Exchange.
  • These listings put the total number of ETFs listed in Taiwan at 216, of which 97 are bond ETFs.

 

ETFs Launched in February 2021 in the Asia ex-Japan Region  

Listings

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

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