ETFs benchmarked to FTSE China A50 Index surpass $10 billion

Jan 4th, 2013 | By | Category: ETF and Index News

FTSE Group, a leading global index provider, has announced that the combined assets of exchange-traded funds (ETFs) benchmarked to the FTSE China A50 Index have passed through the US$10 billion mark.

ETFs benchmarked to FTSE China A50 Index surpass $10bn

ETFs benchmarked to the FTSE China A50 Index have surpassed US$10 billion in assets under management.

The milestone underlines FTSE’s current leadership position in the China ETF marketplace, with a majority of the assets under management in China-themed ETFs listed globally (more than 58%) benchmarked to FTSE indices.

ETFs linked to the FTSE China A50 Index include the synthetically-replicated iShares FTSE A50 China ETF (2823) and the physically-replicated CSOP FTSE China A50 ETF (2822), both listed on the Hong Kong stock exchange. Latest filings show that these funds have assets of US$7.6 billion and US$2.2 billion respectively (the market has since paired gains, trimming assets in these funds).

The FTSE China A50 Index represents the 50 largest A-Share companies by market capitalisation, adjusted for liquidity and tradability. A-Shares are stocks of companies incorporated in mainland China that trade in Chinese Yuan (CNY) on domestic exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange.

The index is dominated by the financial sector, which has a weight of approximately 65%, with banks accounting for about 39%. Major holdings include Ping An Insurance, China Merchants Bank, Shanghai Pudong Development Bank, Industrial Bank, and China Minsheng Banking.

China A-shares are typically only available for purchase by citizens of mainland China, which is why the iShares fund has been structured synthetically using swaps. Recently, however, Chinese authorities have extended the Renminbi Qualified Foreign Institutional Investors (RQFII) scheme which allows foreign investors to hold A-Shares physically. A number of ETFs have been launched under this scheme, including the aforementioned CSOP fund.

Donald Keith, Deputy Chief Executive of FTSE Group, said: “With over 11 years’ experience developing indices specifically for the China market, FTSE has become widely recognised by investors and ETF issuers globally as the natural choice for creating China-themed investment products. At FTSE we continue to review and expand our China-themed offerings working in close consultation with clients to ensure we continue to provide optimal tools to support the growing investment opportunities in China.”

While its A-Share and Hong Kong-focused FTSE China 25 Index have proved hugely successful (the FTSE China 25 is the underlying for the $1.2 billion iShares FTSE China 25 ETF (FXC) listed on the London Stock exchange), FTSE is not alone in offering China-focused equity indices. Indeed, the company faces stiff competition from rivals including MSCI, with its MSCI China A Share and MSCI China indices, and the China Securities Index Company, with its widely followed CSI 300 Index.

These providers have enjoyed considerable recent success. For example, Harvest Global Investments, a Chinese asset manager, recently launched the Harvest MSCI China A Index ETF (3118), a widely subscribed RQFII-approved ETF based on the MSCI China A Index. Similarly, Huatai-PineBridge, a joint venture between New York asset manager PineBridge Investments and Chinese broker Huatai Securities, recently selected the CSI 300 Index to underlie its mainland China ETF, the Huatai-PineBridge CSI 300 ETF (510300). This fund raised a whopping $5 billion on its listing on the Shanghai and Shenzhen stock exchanges.

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