CSOP Asset Management has launched a new ETF in Hong Kong providing exposure to the mid- and small-cap segments of the Chinese onshore equity market.

The fund is the first ETF in Hong Kong to track the CSI 500 Index.

The CSOP CSI 500 ETF has listed on the Stock Exchange of Hong Kong and is available to trade in Hong Kong dollars (3005 HK) and Chinese renminbi (83005 HK).

The fund is linked to the CSI 500 Index, which selects constituents from the parent CSI All Share Index of China A-share stocks.

A-shares are Mainland-domiciled, renminbi-denominated stocks that trade on either the Shanghai or Shenzhen stock exchanges.

The parent index includes all A-shares that have been trading for at least three months.

The index methodology removes the constituents of the CSI 300 Index, a composition of the 300 largest A-share stocks that satisfy liquidity thresholds, as well as stocks in the top 300 by market cap that do not satisfy the CSI 300’s liquidity test.

The remaining stocks are then ranked by average daily trading value over the past year with the bottom 20% eliminated. The index selects the 500 firms with the highest market cap to form the index.

Constituents are weighted by float-adjusted market capitalization. Reconstitution and rebalancing occur semi-annually in June and December with the index adopting buffer zones to limit unnecessary turnover.

The largest sector exposures are information technology (20.2%), followed by materials (18.1%), industrials (17.8%), healthcare (9.8%), and consumer discretionary (8.4%). The index is well-diversified at the constituent level with the largest stock exposure being Wingtech technology at 1.0%.

The fund is the first dedicated CSI 500 ETF to list in Hong Kong. It has been seeded with $100m and comes with an expense ratio of 1.20%.

Melody He, Head of Business Development at CSOP Asset Management, commented, “There are several established China A-shares ETFs in the market already, with decent size and turnover, providing investors with fundamental exposure to China A-shares. However, these China A-shares ETFs are heavily weighted on financial sectors and highly correlated in performance with limited diversification. With global investors’ knowledge on China going deep, we think it is good timing to introduce the CSOP CSI 500 ETF to global investors especially when CSI 500’s valuation has already returned to historical lows.”