Asia ETF Roundup (Industry) – June 2022

China-HK ETF Connect Launches on 4 July. 

Jackie Choy, CFA 13 July, 2022 | 9:47
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For economic and market news relating to Asian ETFs, please refer to our “Asia ETF Roundup (Market) – June 2022”.

ETF Industry News

ETF Connect Launches on 4 July

On 28 Jun, the Hong Kong’s Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) jointly announced that the inclusion of ETFs into Stock Connect would be taking effect from Monday, 4 July.

Under the ETF Connect, investors, through Hong Kong brokers, can invest in 83 ETFs in total at the Shanghai Stock Exchange (53) and Shenzhen Stock Exchange (30) respectively. This initial list of 83 ETFs includes ETFs tracking board market indices and thematic/sector indices. Mainland investors can invest in 4 ETFs listed on Hong Kong Stock Exchange through mainland brokers. The initial list of 4 ETFs includes the Tracker Fund of Hong Kong (02800), Hang Seng China Enterprises Index ETF (02828), CSOP Hang Seng TECH Index ETF (03033) and iShares Hang Seng TECH ETF (03067).

Hang Seng Index ETF's Fate Will Be Decided at an Upcoming EGM

On 13 June 2022, the manager of Hang Seng Index ETF (02833/82833) published a proposal outlining the fund's fate. Under the terms of the proposal, the fund would cease trading on 5 Sept 2022 and be delisted from the Hong Kong Exchange on 13 Sept 2022. The proposal is subject to the unitholders' approval and will be put to a vote at an extraordinary general meeting on 13 July 2022. Upon delisting, the fund would become an unlisted index fund.

If the proposal is approved, investors could take one of two courses from 14 July to 7 Sept 2022: (1) the unlisted fund route or (2) the conversion route to the Tracker Fund of Hong Kong (TraHK; 02800). Investors choosing the unlisted fund route will be required to open an investment fund account with Hang Seng Bank, the designated authorized distributor of the fund. Investors choosing the conversion route can request to convert their fund units into units of the Tracker Fund of Hong Kong 02800, or TraHK, subject to a conversion ratio based on the two funds' net asset values as of 8 Sept 2022, plus conversion costs, which could amount to 0.10% to 0.20% of TraHK's NAV. These costs would be borne by the converting investors, not existing TraHK shareholders. It should be recalled that on 29 March 2022, the trustee of TraHK had announced that the fund's supervisory committee had completed a manager review and identified Hang Seng Investment Management, the manager of Hang Seng Index ETF, as successor to State Street Global Advisors Asia as TraHK's manager. The manager transition is expected to be completed in the third quarter of 2022, subject to regulatory approvals.

MSCI Proposed to Reclassify Nigeria Indexes to Standalone Markets status

The MSCI Index Policy Committee proposed to reclassify the MSCI Nigeria Indexes from Frontier Markets to Standalone Markets status. MSCI cited that the deterioration of repatriation of funds from Nigeria as a key reason for the proposed reclassification. A consultation on the reclassification proposal is open to market participants’ feedback until 31 Aug 2022.

Another 5 Companies Identified Under Holding Foreign Companies Accountable Act (“HFCAA”)

During the month of June, the U.S. Securities and Exchange Commission identified another 5 companies under the Holding Foreign Companies Accountable Act (“HFCAA”). This puts the total number of companies on the provisional list and conclusive list of issuers identified under the HFCAA at 153 as of the end of June 2022. Companies added to the list during the month included Wave Sync Corp. (WAYS) and Finger Motion, Inc. (FNGR). According to the HFCAA and the companies’ announcements, a company’s ADR could be delisted from a U.S. stock exchange if the company is identified on the list for three consecutive years.

Chinese Equity ETF Watch – Strong Inflows into Chinese Equity ETFs in the U.S.

  • Hong Kong-domiciled ETFs in the China Equity Category saw net outflows estimated at USD 0.3 billion in June, mainly driven by an estimated outflow from the Hang Seng China Enterprises Index ETF (02828/82828).
  • Hong Kong-domiciled ETFs in the China Equity - A-Shares Category saw large estimated net inflows of USD 0.6 billion in June, mainly driven by the net inflows into ChinaAMC CSI 300 ETF (83188/03188) and CSOP FTSE China A50 ETF (82822/02822), estimated at USD 0.3 billion and USD 0.1 billion, respectively.
  • In the first half of 2022, Hong Kong-domiciled ETFs in the China Equity Category and the China Equity – A-Shares Category saw estimated net inflows of USD 0.9 billion and USD 0.3 billion, respectively.
  • In the U.S., the iShares China Large-Cap ETF (FXI) and the iShares MSCI China ETF (MCHI) netted an estimated USD 1.5 billion each. The KraneShares CSI China Internet ETF (KWEB) gathered USD 1.2 billion and the Xtrackers Harvest CSI 300 China A ETF (ASHR) USD 1.0 billion. 

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New Launches and Listings

China: 6 ETF New Listings

  • Chinese ETF providers listed 6 new ETFs on the Shanghai Stock Exchange and Shenzhen Stock Exchange in June. These included 4 thematic/sector ETFs, a strategic beta ETF and an ETF tracking the ChiNext index.
  • Two bond ETFs and an ETF tracking the CSI 800 Index were delisted during the month.
  • These listings and delistings put the total number of ETFs listed in China at 694 (255 ETFs on the SZSE, 439 ETFs on the SSE).

Hong Kong: 1 ETF New Listing

  • Samsung Asset Management listed an actively-managed ETF on blockchain technologies on the Hong Kong Exchange.
  • This listing put the total number of ETFs listed in Hong Kong at 248 (162 ETFs and 86 multiple counters).

South Korea: 21 ETF New Listings

  • Korean ETF providers listed 14 actively-managed ETFs, 3 thematic/sector ETF, 1 bond futures ETF, 2 ETFs tracking the S&P 500 index and an ETF tracking the KOSPI 200 Index.
  • These listings put the total number of ETFs listed in South Korea at 591.

Taiwan: 2 New ETFs Listing

  • ETF providers in Taiwan launched a sector ETF and a strategic-beta ETF on the Taiwan Stock Exchange.
  • Two bond ETFs and an equity ETF were delisted during the past two months.
  • This listing puts the total number of ETFs listed in Taiwan at 226.

 

ETFs Launched in June 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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