China equity ETFs have bounced back strongly, posting sharp gains over the past two days as increased efforts by regulators to stabilise the market have seen equity prices surge. As at the time of writing, the db x-trackers Harvest CSI300 Index UCITS ETF (DR) (RQFI LN), one of the larger physical China A-share ETFs on offer in Europe, had gained 18.9% since Wednesday’s close. Forceful measures have been announced to provide liquidity, quell selling pressure and encourage stock purchases, putting an end to the equity market’s fall. These measures should work to stem redemptions from exchange-traded funds and reduce margin calls for leveraged equity owners which drove forced equity selling over June and July.

The European exchange-traded fund and exchange-traded product industry gathered more assets in the first half of 2015 than in the first half of any previous year. European flows are in keeping with the global trend of record beating ETF/ETP asset growth so far this year, with record levels of net new assets being gathered globally ($152bn) and in the US ($103bn). Among ETF providers, Vanguard gathered the largest net inflows in June with $685m, followed by Source with $362m and UBS ETFs with $303mn net inflows.

China equity exchange-traded funds, such as the European listed db x-trackers Harvest CSI300 Index UCITS ETF (DR), saw their values decline on Wednesday in line with sharp falls on domestic Chinese stock markets. The blue-chip CSI 300, which reflects the performance of 300 renminbi-denominated securities listed on the Shanghai and Shenzhen stock exchange (so-called A-Shares), fell a thumping 6.8% knocking the AUM of ETFs linked to it.

BlackRock, the asset manager behind the iShares brand of exchange-traded funds, has unveiled the iShares MSCI EMU USD Hedged UCITS ETF (EMUU LN), a US dollar-hedged version of their Eurozone equities ETF. The fund responds to investor demand for European equity exposure with hedged euro currency risk. Blackrock’s Tom Fekete, Head of Product for iShares in EMEA, commented: “Many investors are interested in the prospects for European stocks but want new ways to invest in a risk managed fashion. Europe has experienced a cyclical rebound from 2014 and equity valuations are attractive relative to those in the US. At the start of 2015, corporate earnings revisions in Europe turned positive for the first time since 2010.”

A new survey from London-based exchange-traded fund provider Source points to continued demand for ETFs, particularly as a method of gaining broad market exposure, with growth in smart beta strategies also expected to be strong. Of the 559 professional investors and advisers interviewed, 71% were currently invested in passive tracker ETFs, with 37% of respondents expecting to increase their allocation in 2015.

Source, one of the largest providers of exchange-traded funds in Europe, earlier this month launched two new ETFs focused on eurozone and Japanese exporters, with listings on LSE and XETRA. Peter Thompson, President of Source, commented: “We identified a particular need from our investors to gain more targeted exposure to the topical themes of currency devaluation and quantitative easing; hence these indices focus precisely on those companies in the Eurozone and Japan that have a majority of non-domestic revenues. This could be especially valuable now with both the ECB and Bank of Japan using QE, offering the potential for weaker currencies that is likely to boost exporters’ earnings.”

Recent volatility in currency markets has awakened investors to the negative effect currency movements can have on asset returns, but is this a call for wider adoption of currency-hedged strategies or simply short-term noise which should be ignored by long-term investors? Divergent central bank policies have driven significant currency swings in recent years. Unhedged equity returns have been eroded by moves like the Japanese yen falling 33.6% against the euro between July 2012 and December 2013 and the euro falling 22.1% against the US dollar between March 2014 and March 2015. Consequently, inflows into currency-hedged international equity ETFs have surged in 2015.

Global index provider Morningstar will review the possibility of including China A-Shares in its emerging markets indices at its annual index review in August 2015. China A-Shares provide physical exposure to domestic Mainland China stocks and represent a significant portion of global assets. While their inclusion would lead to more representative global indices, accessibility difficulties for institutional investors has meant their exclusion up to this point. Sanjay Arya, Head of Morningstar Indexes, commented: “In spite of several improvements enacted by Chinese regulators to improve the accessibility to the mainland A-Share market, the Qualified Foreign Institutional Investor program is still a long way from being an easily accessible and investable market.”

Source, one of the largest providers of exchange-traded funds in Europe, have announced they will be the first European ETF issuer to license the newly launched FTSE RAFI Equity Income Index Series. Lee Kranefuss, Executive Chairman of Source, said: “Many investors have been struggling to generate income in the current environment, with bond yields low and with most high-yielding equity strategies being overly exposed to low quality or low growth stocks. Our investors said they want a strategy that focuses on dividends and is better-structured than what is currently available. This is why we approached Research Affiliates and, together with FTSE, have developed these new investment strategies.”

Source has introduced USD- and EUR-hedged share classes for its Source JPX-Nikkei 400 UCITS ETF. The currency-hedged share classes will enable US dollar- and euro-based investors to gain exposure to this increasingly important equity benchmark while mitigating the adverse effect of a depreciating yen. Unveiled in 2013, the JPX-Nikkei 400 Index provides broad exposure to Japanese stocks whilst focusing on companies with the potential to generate shareholder value. The index was developed by Nikkei and the Japan Exchange Group, and selects stocks on the basis not only of size but also return on equity, operating profit, transparency and corporate governance.