Samsung’s QFII-approved Kodex FTSE China A50 ETF launches on Korea Exchange

Jan 21st, 2013 | By | Category: Equities

Kodex, the exchange-traded fund (ETF) division of Seoul-based Samsung Asset Management, has launched South Korea’s first Qualified Foreign Institutional Investors (QFII) ETF.

Samsung's QFII-approved Kodex FTSE China A50 ETF launches on Korea Exchange

Kodex, the ETF divison of Samsung Asset Management, has launched South Korea’s first QFII-approved China A-share ETF. The fund has been listed on the Korea Exchange (KRX).

The Samsung Kodex FTSE China A50 ETF, which is based on the FTSE China A50 Index, has been listed on the Korea Exchange and offers investors direct physical access to the 50 largest blue-chip companies listed in mainland China.

The launch is something of a coup for Samsung’s Kodex as it becomes the first firm outside of Hong Kong to offer both an ETF under the QFII scheme and one benchmarked to the widely followed FTSE China A50 Index.

The new ETF will no doubt enjoy strong support from investors and is likely to enhance Kodex’s position as South Korea’s leading ETF provider.

The firm currently manages 29 ETFs with total assets under management of $7.8 billion (equivalent to 55% of the domestic market share). Its Kodex 200 ETF (069500), which is benchmarked to the KOSPI 200, the flagship equity index of the Korea Exchange, is the country’s largest ETF with approximately $4.2 billion in assets under management.

As well as attracting maiden inflows from South Korea’s mutual fund sector, the new ETF could lure assets away from existing China-based ETF, including Kodex’s own Kodex China H ETF (099140) and Mirae Asset’s Tiger China ETF (117690), which are restricted to holding Hong Kong-listed stocks (“H” shares and “Red chips”).

The new fund is able to offer physical access to so-called A-shares owing to its inclusion in the QFII scheme. This scheme, which is tightly controlled by Chinese authorities, allows foreign investors to own a strict quota of physical A-shares. These are shares of Mainland Chinese companies that are traded in Chinese yuan (CNY) on domestic exchanges such as the Shanghai and Shenzhen stock exchanges.

Commenting on the launch, Jaekyu Bae, Director of the ETF & Index Investment Division at Samsung Asset Management, said: “There is a lot of interest in the A-share market as local investors expect the Chinese economy to turnaround this year after several quarters of slowing growth. The Samsung Kodex FTSE China A50 ETF will be an attractive investment vehicle for both new and existing investors due to its liquid nature as an ETF.”

In addition to being an exciting new product for Kodex, the launch represents another good win for FTSE Group, which is fast establishing itself as the leading provider of China-focused equity indices (more than 58% of assets under management in China-referenced equity ETFs are currently based on FTSE indices). The selection of the FTSE China A50 Index over rival A-share indices, such as the MSCI China A Share Index and the CSI 300, will further build on this position and increase the assets under management benchmarked to this index, which recently surpassed $10 billion.

Jessie Pak, Managing Director, FTSE Group, said: “We are delighted to be working with Samsung Asset Management to play a pioneering role under the QFII scheme supporting the development of Chinese investment opportunities for Korean and international investors. With a strong track record providing optimal China index solutions, the FTSE China Index Series has become widely recognised by investors and ETF issuers globally as the natural choice for creating China-themed investment products.”

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