A few days before the stock connect opened, Chinese authorities announced that foreign investors using the Shanghai-Hong Kong connect to buy yuan-denominated A-shares will be temporarily exempt from capital-gains tax, reducing some of the concerns of global asset managers.
With the opening iof the stock connect, Rob Hughes, head of index and advisor solutions at Nasdaq earlier told Fund Selector Asia there is a big potential for exchange-traded funds in Hong Kong as well as China.
ETFs have typically had difficulty gathering assets in Asia. Currently only 29 China-focused ETFs that have a three-year track record are available for sale in the region.
Looking at the one-year performance of that group reveals that ETFs from Deutsche Asset and Wealth Management and BlackRock Asset Management are among the top five performers.
Topping the chart is the DB X-Trackers CSI 300 Utilities UCITS ETF. It seeks to mirror the performance of the CSI300 Utilities Index, which reflects the performance of shares listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange.
However, although the DB fund had a 27.5% return, it underperformed its benchmark, which rose 29.7% during the review period. The fund was launched in 2010 and has a total expense ratio of 0.5% as of 30 September 2014.
The CSI300 Utilities Index has a 88.1% weighting to power producers and energy traders, 10.6% in water utilities and 1.34% to gas utilities.
The next best performing ETF was iShares CSI Infrastructure Index with a 23.9% return. Launched in 2009, the fund charges a management fee of 0.99% and seeks to give returns closer to the CSI Infrastructure Index. According to the fact sheet, construction and engineering has a 33.7% weighting followed by electric utilities (32.9%) and transportation (18.7%).
Two more funds from DB X-Trackers featured in the top five: DB X-Trackers CSI300 Transportation (23%) and DB X-Trackers CSI 300 Industrials (14.2% underperforming the benchmark CSI300 Industrials that rose 18.7%).
The TER of both the transportation and the industrial ETFs was 0.5% as well for the year ended 30 September.
iShares CSI Materials Index secured the fifth slot with a 8.3% return, underperforming the underlying CSI 300 Material Index that rose 10.35%. The fund, launched in 2009, levies a 0.99% management fee.
One-year performance of the top-performing ETFs investing in China:
