Asia ETF Roundup (Industry) – August 2014

RQFII Quotas – More Countries? And more for Hong Kong?
According to the Wall Street Journal, Switzerland and Luxembourg may be the next countries to be granted with RQFII quotas. In addition, the Rmb 270 billion quota for Hong Kong has nearly been used up. Reportedly, additional quota has been applied for.

ASEAN Funds Passporting Goes Live
On 25 August 2014, the Association of Southern Asian Nations (ASEAN) collective investment schemes (CIS) framework for cross-border offering was launched by the ASEAN Capital Markets Forum (ACMF). Malaysia, Singapore and Thailand are the member jurisdictions for this framework.  The Handbook for CIS Operators of ASEAN CISs and the Standards of Qualifying CIS can be found in the ACMF website.

In the Standards of Qualifying CIS, specific additional rules require an ETF to: (1) use a passive management strategy; (2) directly invest in the underlying without using derivatives to create synthetic exposures; and (3) track widely-accepted non-leveraged financial indices comprising eligible assets as stated in the Standards.

Two Da Cheng ETFs Closing
On 7 August 2014, Da Cheng announced its decision to terminate two out of the three ETFs that it manages in Hong Kong, namely the Da Cheng CSI Hong Kong Private-owned Mainland Enterprises Tracker (03022) and the Da Cheng CSI Hong Kong State-owned Mainland Enterprises Tracker (03077). According to the announcement, the last date of dealing on the Stock Exchange of Hong Kong will be 16 September 2014 and the proposed termination date will be on or around 12 November 2014. After the termination, Da Cheng will only have one ETF listed in Hong Kong under its management, namely the Da Cheng CSI China Mainland Consumer Tracker (03071).

The closing of these two Da Cheng ETFs follows the closing of the four HSBC ETFs earlier this year.

China Universal ETFs Will No Longer Provide for Realised and Unrealised Capital Gains Tax Except for Land Rich Companies
During the month, China Universal announced that the C-Shares CSI 300 Index ETF (83008, 03008), C-Shares CSI Consumer Staples Index ETF (83107, 03107) and the C-Shares CSI Healthcare Index ETF (83132, 03132) will no longer provide for realised and unrealised capital gains tax for A-Shares except for land rich companies. This follows similar announcements from ChinaAMC ETFs, the CSOP RQFII ETFs, the E Fund ETFs, the Harvest ETFs and the Bosera ETF which no longer provide for such tax.

As of 15 August 2014, the C-Shares CSI 300 Index ETF had a total provision of Rmb 10.3 million of which Rmb 9.5 million was related to non-land rich companies (2.47% of the NAV of the ETF); the C-Shares CSI Healthcare Staples Index ETF had a total provision of Rmb 0.74 million of which Rmb 0.72 million was related to non-land rich companies (0.82% of the NAV of the ETF); and the C-Shares CSI Consumer Staples Index ETF had a total provision of Rmb 0.38 million of which Rmb 0.35 million was related to non-land rich companies (1.13% of the NAV of the ETF).

RQFII ETF Watch – Another Month of Strong Net Inflows of Rmb 8.5 billion from RQFII ETFs

• In August 2014, RQFII ETFs recorded another month of strong net inflows, estimated at Rmb 8.5 billion (15% of beginning and 13% of ending AUM). This compares to Rmb 8.3 billion of net inflows in the prior month. The majority of the net inflows came from the CSOP FTSE China A50 ETF (82822 & 02822), estimated at Rmb 3.0 billion, followed by the Bosera FTSE China A50 Index ETF (82832 & 02832), estimated at Rmb 2.5 billion, and the CSOP China 5-Year Treasury Bond ETF (83199 & 03199) estimated at Rmb 1.4 billion.
• The largest A-Share ETF by AUM in Hong Kong, iShares FTSE A50 China Index ETF (02823), recorded net inflows estimated at Rmb 4.4 billion during the month, compared to Rmb 2.2 billion net inflows in July.

New Launches and Listings

Invesco Great Wall Lists Two Sector ETFs in China
On 19 August 2014, Invesco Great Wall listed two sector ETFs on Shanghai Stock Exchange (SSE), namely the Invesco Great Wall CSI 800 Food and Beverage ETF (512210) and the Invesco Great Wall CSI TMT 150 ETF (512220). The ETF tracks the CSI 800 Food and Beverage Index and the CSI TMT 150 Index (with constituents from the technology, media and telecommunications sectors), respectively.

The listing of these two ETFs puts the total number of ETFs listed in China at 90.

Hanwha Lists a Synthetic Leveraged ETF in Korea
On 25 August 2014, Hanwha Asset Management listed a synthetic leveraged ETF on the Korea Stock Exchange (KRX), namely the ARIRANG SYNTH-China H Leverage(H) ETF (A204420). The ETF aims to produce twice the daily volatility of the Hang Seng China Enterprises Index.                                                            

Mirae lists an ETF in Korea
On 27 August 2014, Mirae Asset listed an ETF on the KRX, namely the TIGER NASDAQ BIO ETF (A203780). The ETF tracks the NASDAQ Biotechnology Index (Price Return).

The listing of this ETF and the Hanwha ETF puts the total number of ETFs listed in Korea at 163.                                                   

List of ETFs Launched in August 2014