CSOP Asset Management has launched the CSOP Hang Seng Index ETF (3037 HK) in Hong Kong, providing low-cost, fully replicated exposure to the Hang Seng Index.
Ding Chen, Chief Executive Officer of CSOP Asset Management.
The fund has listed in Hong Kong dollars on the Stock Exchange of Hong Kong (HKEX) and comes to market with HK$160 million (approx. $20m) in assets.
The Hang Seng Index, arguably the foremost benchmark for the Hong Kong equity market, currently consists of 55 large and highly liquid Greater China companies listed on the Main Board of HKEX.
The index is dominated by companies from traditional economic sectors, most notably financial stocks which account for approximately 40% of the total weight.
This is expected to change, however, as Hang Seng Indexes has announced plans to enhance the index’s diversification through a series of regular reviews, targeting a composition of 80 stocks by mid-2022 and ultimately aiming to fix the number of constituents at 100. These reforms are predicted to bring broader market cap coverage as well as greater representation of newer sectors of the Chinese economy.
There are multiple ETFs currently listed on HKEX that track the Hang Seng Index with approximately HK$140bn ($18bn) linked to these products, according to HKEX data as of the end of March.
The largest of these is the HK$95.3bn ($12.3bn) Tracker Fund of Hong Kong (2800 HK) which is managed by the Asia division of US investment manager State Street Global Advisors. Earlier this year, the Tracker Fund temporarily suspended shares trading in certain companies affected by US sanctions on China including China Mobile (which has a current weight of 2.6% in the Hang Seng Index) and China National Offshore Oil Company (1.2%) but quickly changed course on the basis that the fund was not under US jurisdiction.
The incident has, nonetheless, raised concerns over the potential for tracking error in passive Chinese equity funds that are managed by US institutions. This has presented an opportunity for local managers, such as CSOP, which are not bound by US sanctions, to challenge the dominance of some well-established products in this space.
The ETF comes with an expense ratio of 0.10% which is one basis point cheaper than the fee on the Tracker Fund. The cheapest fund, however, is the HK$270 million ($35m) iShares Core Hang Seng Index ETF (3115 HK) at 0.09%, though this is overseen by US investment manager BlackRock.
Ding Chen, Chief Executive Officer of CSOP Asset Management, said: “CSOP is the first Chinese offshore asset management company established in Hong Kong. Since its establishment in 2008, CSOP has been committed to bringing high-quality investment tools to Hong Kong investors. ‘In Hong Kong, for Hong Kong’ has always been our investment philosophy and commitment to Hong Kong investors. It is also the reason we bring the most authentic Hong Kong ETF products to Hong Kong investors at a very minimal management fee.”