China ETFs among Asia’s best asset gatherers

Asset Class in Focus

Passive China-focused products are among the bestselling funds launched in Asia over the last year.

Of the top ten funds (by net flows) that were launched in Asia over the past twelve months, eight are domiciled in China and of those, six are passive products, according to a report from Broadridge Financial.

However, there is not much differentiation. Two products from different firms track the same CSI Central-SOEs Structural Reform Index and four products, also from different firms, track the ChinaBond 1-3 Year CDB Bond Index.

Asia top fund launches during the last 12 months ($bn) ex Money Market funds ($bn)

Fund name

Domicile

Launch date

Net sales (Net flows)

Bosera CSI Central-SOEs Structural Reform Index ETF Fund

China

2018-10

2.8

China Southern 3 Years Operation Strategy Flexible Fund

China

2018-07

2.7

ChinaAMC CSI Central-SOEs Structural Reform Index ETF Fund

China

2018-10

2.1

China Life AMP ChinaBond 1-3 Year CDB Bond Index Fund

China

2019-03

1.8

China Southern ChinaBond 1-3 Year CDB Bond Index Fund

China

2018-11

1.7

Ping-An UOB HuiXuan Pure Bond Fund

China

2018-09

1.5

BOC ChinaBond 1-3 Year CDB Bond Index Fund

China

2019-03

1.5

Yuanta US 20+ Year AAA-A Corporate Bond ETF

Taiwan

2018-09

1.4

AM-One Global High Quality Growth Equity Fund (2Y) NH

Japan

2018-08

1.4

Penghua ChinaBond 1-3 Year CDB Bond Index Fund

China

2019-03

1.4

Source: Broadridge Financial Note: Data excludes money market funds

Regardless of the product duplication, ETFs for sale onshore in China continued with upward momentum, with net inflows of $4.1bn during the first half of 2019. Last year, China’s ETF industry ballooned, with assets growing 53.4% to $104.5bn, according to a Cerulli Associates report. Net inflows at the time amounted to $27bn, which is the highest in the past seven years.

By comparison, in 2017 ETFs available onshore in China had net outflows of RMB 3.5bn ($498m) and in 2016, net inflows of RMB 33.5bn in 2016.

“Passive products have never gained as much traction as they did in 2018 and 2019 to date, thanks to market movements and managers’ consistent efforts to educate investors on these products, especially after the market turbulence in 2015,” Hui Miao, senior analyst at Cerulli, said in the report.

ESG ETFs?

Broadridge noted that ESG-focused ETFs in China gained traction this year, with net inflows of $13.7m during the first half of this year.

However, there are only a few ESG-focused ETFs in China, which include the Bocom Schroders SSE 180 Corporate Governance Index ETF, the CCB Principal SSE Social Responsibility ETF and the GF CSI Environmental Protection Industry ETF, according to data from the Shanghai Exchange.

The Environmental Protection Industry ETF had the highest net inflows of RMB 1.2bn ($170m) during the one-year period ending March 2019, according to latest data from Morningstar Direct. The two other ETFs, however, had net outflows of RMB 82m during the same period.

The lack of ESG-f0cused products in China provides opportunities for asset managers, as more China-based investors are willing to invest in ESG ETFs, according to a survey conducted by Brown Brothers Harriman last year.

Source: Brown Brothers Harriman

Broadridge noted that between the end of March 2018 to the end of March this year, net inflows into ESG funds in China, which include both mutual funds and ETFs, totalled $4.6bn. In total, ESG fund assets in the mainland totalled $5.7bn at the end of March 2019.

 

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