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China new economy fund launches in Malaysia

Affin Hwang AM has launched three China-focused products in Malaysia this month and it has plans to develop leveraged and inverse products.

Kuala Lumpur-based Affin Hwang Asset Management has listed the TradePlus S&P New China Tracker on the country’s local bourse today, according to a statement from the firm.

This is the second ETF that the firm is managing, the other being the Shariah Gold Tracker, which was launched in December 2017 and is Malaysia’s only commodity ETF.

The New China Tracker aims to replicate the performance of the S&P New China Sectors Ex A-Shares Index, which provides investors exposure to Chinese new economy stocks, excluding China A-shares.

“[China’s] services and consumption sector now constitute [at least] 60% of contribution to GDP growth and is expected to increase exponentially with rising income levels and rapid urbanisation in the country,” said Teng Chee Wai, the firm’s managing director, in the statement.

“As China continues to harness these strengths, we see opportunities emerging from the New China and the various sectors riding on these positive consumption trends.”

A Kuala Lumpur-based firm spokesman explained that the product’s index excludes China A-shares in order to ease volatility.

“The A-shares has seen some large swings, so we want to provide access to the China giants, [with little] volatility,” he said.

An A-share feeder fund, the Affin Hwang World Series – China A Opportunity Fund, was launched earlier this month. It is the locally-wrapped version of the UBS (Lux) Investment Sicav – China A Opportunity Fund.

Also in January, a China-focused feeder fund was rolled out. The China Allocation Opportunity Fund is the locally-wrapped version of UBS Asset Management’s China Allocation Opportunity fund – a mixed asset fund covering both the H- and A-share markets, the spokesman said.

Growing China products

The latest product is Malaysia’s second China-focused ETF, according to records from Bursa Malaysia. The other product is the CIMB FTSE China 25 ETF, which was launched by CIMB-Principal AM in 2010 and invests in Chinese stocks listed on the Hong Kong Exchange.

Malaysian investors are pouring money into China funds. Greater China equity funds became the second most popular fund category in Malaysia last year, with $1.9bn in net inflows as of the end of November, according to data from Morningstar Direct.

Other firms are seeing the opportunity in offering China-focused products.

In September, TA Investments launched the All China Equity Fund, which is the locally-wrapped version of Investec’s All China Equity Fund.

CIMB Principal Asset Management launched last year Malaysia’s first China fund that uses the renminbi qualified foreign institutional investor (RQFII) scheme. In 2017, it also launched the country’s first China-focused multi-asset fund.

ETF development

Malaysia’s ETF market remains small, with only 10 ETFs listed in the country, according to data from the local bourse. Only four asset managers are offering ETFs.

However, the country’s securities regulator is setting the stage to include other types of ETFs. Last year, the Securities Commission Malaysia (SC) revised its guidelines on ETFs to allow the issuance of L&I products, synthetic ETFs, physical commodity ETFs and smart beta ETFs, according to a statement from the regulator at the time.

Affin Hwang is set to take advantage of the new rules. In November, it entered into a strategic partnership with Samsung Asset Management in Hong Kong to co-develop ETF products in Malaysia.

The partnership includes the development and offering of L&I ETFs to Malaysia’s domestic investors. Under the partnership agreement, the Malaysian firm will appoint Samsung as its investment advisor to provide advisory services in the management of its derivative type ETFs.

Affin Hwang’s spokesman expects that the firm’s L&I products will be launched by the first half of this year.

Simarly, Kenanga Investors entered into a strategic partnership with Taipei-based Yuanta Securities Investment Trust in June to develop ETFs in Malaysia, which include L&I ETFs.









Part of the Mark Allen Group.