Vanguard launches total China ETF in Hong Kong

May 10th, 2018 | By | Category: Equities

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Vanguard has launched the Vanguard Total China Index ETF on Hong Kong Stock Exchange.

Yan Pu, head of portfolio review, Asia, Vanguard Investments Hong Kong

Yan Pu, head of portfolio review, Asia, Vanguard Investments Hong Kong.

The underlying FTSE Total China Connect Index provides exposure to all of China’s equity share classes in the large- and mid-cap space. Nearly half (45.7%) of the index’s exposure is made up of China A-Shares (companies domiciled and listed in mainland China), while H-shares (companies domiciled in China but listed in Hong Kong) make up nearly one-fifth (18.9%) of the total weight. The index also provides exposure to P-chips (15.9%), N-shares (12.9%), and Red-chips (6.0%).

The 1,058 index constituents have a total investable market capitalisation of over $3 trillion. The index is reviewed on a quarterly basis in March, June, September and December.

The fund tracks the index through direct physical replication using a representative sampling strategy. Exposure to A-Share companies is achieved through the China-Hong Kong Stock Connect programme which, subject to trading quotas, allows international investors to trade securities listed on the Shanghai and Shenzhen exchanges and mainland investors to trade securities listed on the Hong Kong exchange.

“This ETF is the most comprehensive China ETF in Hong Kong, and will give investors a convenient tool to gain broad exposure to the world’s second largest economy.”
-Yan Pu, head of portfolio review, Asia, Vanguard Investments Hong Kong

Yan Pu, head of portfolio review, Asia, Vanguard Investments Hong Kong, commented, “Vanguard is pleased to collaborate with FTSE Russell to bring to market the Vanguard Total China Index ETF. This ETF is the most comprehensive China ETF in Hong Kong, and will give investors a convenient tool to gain broad exposure to the world’s second largest economy. Investors can own Chinese listed companies both in and outside of China in a single trade at low cost.

“At Vanguard we believe exposure to China has the potential to offer significant long-term benefits for investors, and that the best way to fully capture those potential benefits is to invest in Chinese equities across the globe, share classes and sectors.”

Mark Makepeace, CEO, FTSE Russell, added, “We are delighted that Vanguard has selected the FTSE Total China Connect Index as the benchmark for its newly-listed ETF. Investor appetite for access to Chinese stocks continues to grow and our new index provides a benchmark for a broad range of companies covering all of the Chinese share classes. The ability to track companies listed both in and outside of mainland China, and from across industry sectors, enhances the representativeness of our China benchmarks and demonstrates FTSE Russell’s strong track record in the region.”

The ETF has been listed with three different currency share classes, denominated in Hong Kong dollars (3169 HK), Chinese renminbi (83169 HK), and US dollars (9169 HK). Distributions will be made in the base currency (renminbi) only.

The fund has an expense ratio of 0.40%.

In Europe, investors may gain exposure to a total China strategy via the ICBCCS WisdomTree S&P China 500 UCITS ETF (CHIN LN). Launched by WisdomTree and Hong Kong-based asset manager ICBC Credit Suisse in July 2016, CHIN is the first European-listed, physically replicating UCITS ETF to offer exposure to a combination of Chinese equity classes. It tracks the S&P China 500 Index and has a total expense ratio of 0.75%.

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