Haitong International is gearing up to launch the first Hong Kong-listed ETF to provide environmental, social, and governance-adjusted exposure to Chinese A-shares.
The fund is set to become the first ETF in Hong Kong to provide ESG-focused exposure to China’s onshore equity market.
The Haitong MSCI China A ESG ETF is set to list on the Stock Exchange of Hong Kong on 15 October and will be available in US dollar (9031 HK), Hong Kong dollar (3031 HK), and renminbi (83031 HK) trading lines.
The fund will track the MSCI China A ESG Universal Index through physical replication.
The index is derived from the parent MSCI China A Index universe that currently includes 475 large- and mid-cap Chinese A-shares – firms that are domiciled in mainland China and trade in renminbi on either the Shanghai or Shenzhen stock exchanges.
The index covers only those securities that are accessible through the Stock Connect program.
MSCI’s ‘ESG Universal’ methodology excludes producers of controversial weapons, violators of international norms, and companies embroiled in severe ESG-related controversies.
The remaining constituents are then weighted using ratings from MSCI ESG Research that evaluate how well each company manages key ESG issues relative to industry peers. The approach increases the weight of firms with more robust ESG profiles while also favouring companies that have improved their profile since the previous evaluation.
The resulting index contains 429 names and is overweight financials (27.9% vs. 21.9% in the parent index) and consumer discretionary (8.2% vs. 6.1%) stocks while underweight consumer staples (13.1% vs. 17.3%), information technology (13.0% vs. 14.0%), and industrials (11.2% vs. 12.4%).
The ETF will have estimated ongoing charges of 1.04% which includes a management fee of 0.60%. Distributions will be sent to investors on an annual basis in July.
The fund is the second ETF from Haitong International, following the Haitong CSI 300 Index ETF (HKD – 2811 HK; RMB – 82811 HK) which launched in March 2014.