Global trade tension has taken its toll on China ETFs in Hong Kong, but some funds are still attracting local investors.
The best example is the ChinaAMC CSI 300 ETF (3188), the flagship product of China AMC (the state-owned asset manager), which has become the biggest China tracker among Chinese issuers in Hong Kong.
The CSI 300 ETF reached 12.86 billion RMB (US$1.81 billion) in total assets this month, overtaking its primary rival, the CSOP FTSE China A50 ETF (2822). Both funds were launched on the Hong Kong Stock Exchange in 2012
The A50 ETF is another popular A-share product for Hong Kong investors. It is managed by CSOP Asset Management, the international arm of Shenzhen-based China Southern Fund Management.
According to Frederick Chu, head of ETFs at China AMC (Hong Kong), A-share ETFs generally recorded substantial net outflows in the second quarter due to the escalating China-US trade conflict.
But he remains upbeat as China has the best performing market in Asia Pacific in 2019.
Citing figures from Bloomberg, he says that the ChinaAMC CSI 300 ETF registered net outflows of US$252 million in the second quarter, while two FTSE A50 ETFs recorded total outflows of over US$2.2 billion.
“China stock market has been experiencing high volatility, but the A-share benchmarks CSI 300 Index and FTSE China A50 Index soared 26% and 29%, respectively, thus far this year,” he adds.
According to figures from the HKEX, Hong Kong ETFs - including leveraged and inverse ETPs, which are popular with retail investors in Hong Kong - registered total net outflows of HK$1.6 billion (US$205 million) in July, the third consecutive monthly decline. Meanwhile, total ETF market capitalization was up from HK$307 billion to HK$321 billion.
Interestingly, some inverse products have secured net inflows recently as investors have sought to profit from negative market volatility. For example, the CSOP Hang Seng Index Daily (2x) Leveraged Product rose as much as 15.57% in early August.
As for China’s onshore market, two largest CSI 300 ETFs launched by China AMC and Huatai-Pinebridge Fund Management, the joint venture between US manager PineBridge Investments and Nanjing-based Huatai Securities, dropped US$1 billion and US$220 million, respectively, during the period due to the recent sell-off in domestic market.
Mr. Chu points out the so-called sectors such as consumer, healthcare, insurance and information have been identified as the major drivers of China’s economy at where a lot of sector leaders in these growth sectors are captured by the CSI 300 Index. He describes the benchmark has become the “China version of S&P500”.