One of Hong Kong’s first ETFs listed on its exchange has been redeveloped amid the region’s efforts to improve market efficiency and global competitiveness. Despite the problems faced with the launching of ETF connect between Hong Kong and China, the Hong Kong Exchange has been expanding its products on offer.

The iShares MSCI Core China Index ETF (2801) has been dematerialised from physical certificates, improving the operations of the ETF. As a result of the ETF’s refinement, BlackRock has promoted the product to its iShares core range in HK and reduced the expense ratio from 59bps to 20bps, making it the cheapest MSCI China ETF available.

With $325m in assets under management, the ETF is comprised of large- and mid-cap segments with A shares, H shares, B shares, red chips, P chips and foreign listings of Chinese stocks. The two largest holdings in the fund are Tencent and Alibaba with 14.6% and 13.1% weight, respectively.

Despite the ongoing trade war between the US and China, the MSCI Index and S&P 500 index exhibit a low correlation of 0.5. The ETF’s year-to-date return is 10.6% which has been slightly hindered by May’s performance where the net asset value fell 13.9%. Nonetheless, a positive June has rectified some of these losses.

Earlier this week, the Hong Kong Exchange listed its first actively managed ETF, highlighting the steps the region is taking to develop its ETF market.