Asia ETF Roundup (Industry) – December 2021 and January 2022

ETFs to be added to China-Hong Kong Stock Connect. Strong inflows into US-domiciled Chinese equity ETFs in January

Jackie Choy, CFA 15 February, 2022 | 11:27
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For economic and market news relating to Asian ETFs, please refer to our “Asia ETF Roundup (Market) – December 2021 and January 2022”. 

 

ETF Industry News

ETF to be Added to China-Hong Kong Stock Connect

On 24 December 2021, the Hong Kong Exchange (HKEx) signed an agreement with the Shanghai Stock Exchange and the Shenzhen Stock Exchange to enable ETFs to be included in the Stock Connect. The inclusion of ETFs in the Stock Connect will allow local investors to gain access to the eligible ETFs on the Hong Kong and Mainland China markets. The press release from HKEx can be found here. While the ETFs eligible for inclusion in the Stock Connect and the operational and technical aspects of the scheme have yet to be announced, we view this development positively as it will allow both ETF markets to expand their investor base. According to the HKEx, the preparation work could take approximately six months.

Recall that the Hong Kong Exchange established Stock Connect Programmes with the Shanghai and Shenzhen stock exchanges in 2014 and 2016, respectively, but ETFs were not included in these programmes. Subsequently the ETF cross-listing scheme facilitated cross-listings of ETFs between the Hong Kong and mainland China markets under a master-feeder structure, with the first batch of cross-listing ETFs launched in October 2020.

 

Singapore-China ETF Linkage

On 28 December 2021, the Singapore Exchange and the Shenzhen Stock Exchange signed a memorandum of understanding to establish an ETF link, allowing investors in Singapore and China to access feeder ETFs listed locally that are linked to ones listed on the other exchange. The press release can be found here.

 

Updates on the U.S. Executive Order

On 16 December 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) updated the Non-Specially Designated Nationals Chinese Military-Industrial Complex Companies List with a number of entities added onto the list. As a result, index providers, such as MSCI and FTSE Russell, announced they would remove a number of constituents from their indices. For example, MSCI deleted 3 securities with total weight of 0.052% from the MSCI China All Share IMI Index. The relevant index announcements can be found here: MSCI, FTSE Russell.

 

Chinese Equity ETF Watch – Hong Kong-Domiciled Offshore and Onshore Chinese Equity ETFs See Estimated Net Inflows of USD 0.3 billion and USD 0.2 billion in January; Major US-Domiciled Chinese Equity ETFs See Large Net Inflows of USD 2.9 billion

  • In 2021, Hong Kong-domiciled ETFs within the China Equity Morningstar Category saw estimated net inflows of USD 0.4 billion. We estimate net inflows of USD 0.7 billion to ETFs in the China Equity - A-Shares Category.
  • U.S.-domiciled Chinese equity ETFs also saw net inflows in 2021. The two largest ETFs by assets under management offering broad Chinese offshore equity exposure—iShares China Large-Cap ETF (FXI) and iShares MSCI China ETF (MCHI)—experienced net inflows amounting to around USD 2.9 billion. The largest ETF by AUM with broad Chinese onshore equity exposure, Xtrackers Harvest CSI 300 China A ETF (ASHR), experienced net inflows of around USD 0.6 billion. The KraneShares CSI China Internet ETF (KWEB) gathered net inflows of USD 7.4 billion.
  • In January 2022, Hong Kong-domiciled ETFs in the China Equity Category saw net inflows, estimated at USD 0.3 billion. Net inflows came mainly from the iShares Core MSCI China ETF (02801) and the Hang Seng China Enterprises Index ETF (02828/82828), each received estimated net inflows of USD 0.14 billion.
  • Hong Kong-domiciled ETFs in the China Equity - A-Shares Category saw estimated net inflows of USD 0.2 billion in January, coming mainly from the ChinaAMC CSI 300 Index ETF (83188/03188) and the iShares FTSE China A50 ETF (02823/82823).
  • In the U.S. in January, we estimated net inflows of USD 1.5 billion from the iShares China Large-Cap ETF (FXI) and the iShares MSCI China ETF (MCHI), net inflows of USD 0.5 billion from the Xtrackers Harvest CSI 300 China A ETF (ASHR) and net inflows of USD 0.9 billion from the KraneShares CSI China Internet ETF (KWEB).

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New Launches and Listings

China: 52 ETF New Listings

  • Chinese ETF providers listed 52 new ETFs on the Shanghai Stock Exchange and Shenzhen Stock Exchange in December 2021 and January 2022, including 4 actively managed (enhanced strategy) ETFs and 37 thematic/sector ETFs.
  • These listings put the total number of ETFs listed in China at 650 (235 ETFs on the SZSE, 415 ETFs on the SSE).

 

Hong Kong: 9 New ETF Listings

  • ETF providers in Hong Kong listed an actively-managed equity ETF, an inverse oil futures ETF, an ETF tracking the FTSE Taiwan Index, 3 sector/thematic ETFs and 3 ETFs tracking the MSCI China A 50 Connect Index on the Hong Kong Stock Exchange.
  • These listings put the total number of ETFs listed in Hong Kong at 238 (154 ETFs and 84 multiple counters, including 28 leveraged/inverse products).

 

India: 6 New ETF Listings

  • ETF providers in India listed a bond ETF, a strategic beta ETF, a sector ETF, a commodity (silver) ETF and two broad market ETFs on the local exchanges.

 

Indonesia: 1 New ETF Listing

  • FWD Asset Management listed an ESG ETF on the Indonesia Stock Exchange.
  • This listing put the total number of ETFs listed in Indonesia at 49.

 

Singapore: 1 ETF New Listing

  • Nikko AM Asia listed an ETF tracking the MSCI China All Shares IMI Future Mobility Top 50 Index on the Singapore Exchange.
  • This listing put the total number of ETFs listed in Singapore at 52 (34 ETFs and 18 multiple counters).

 

South Korea: 19 ETF New Listings

  • Korean ETF providers listed 5 active ETFs, 4 thematic ETFs, 4 leveraged/inverse ETFs, one commodity ETF and 5 broad market ETFs on the Korea Exchange.
  • These listings put the total number of ETFs listed in South Korea at 539.

 

Taiwan: 5 New Listing

  • Taiwan ETF providers listed 4 thematic ETF and 1 strategic beta ETF on the Taiwan Stock Exchange.
  • These listings put the total number of ETFs listed in Taiwan at 223, of which 92 are bond ETFs.

 

ETFs Launched in December 2021 and January 2022 in the Asia ex-Japan Region

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About Author

Jackie Choy, CFA  is the Director of ETF Research for Morningstar Investment Management Asia

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