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Taiwan’s Yuanta files to launch ChiNext ETF

Taiwan’s Yuanta Securities Investment Trust has filed an application to launch an ETF that would track the extremely volatile ChiNext Index.


If approved by the Taiwan Stock Exchange, it would be the first ETF covering the ChiNext to be launched in Taiwan.

After approval from the exchange, the firm would need to get approval from Taiwan’s investment management committee or the Securities Investment Trust and Consulting Association, the Financial Supervisory Commission, and the country’s central bank before launching the fund, according to a Taipei-based Yuanta spokesman.

For compliance reasons, the spokesman declined to give details about the ETF, such as its expected launch and the opportunities the firm sees in the ChiNext market.

The ETF will track the SZSE ChiNext Price Index, which includes the top 100 stocks in terms of market value and liquidity in the Chinext market of the Shenzhen Stock Exchange, according to the TWSE filing.

ChiNext is a Nasdaq-style board of the Shenzhen Stock Exchange that was launched in 2009. As of this writing, there are 601 listed companies on the board with a total stock market value of RMB 5.2trn ($76bn). 

Huge volatility

The ChiNext, as well as the SME boards of the Shenzhen Stock Exchange, accounted for around 70% of the Shenzhen market’s decline in 2016, according to a research note by Bank of America Merrill Lynch, adding that the market was among the worst performers globally.

For the full year 2016, the Shenzhen Composite Index was down by around 14.7%, which was a big swing from when the composite was up by 63% in 2015, according to data from the Securities and Futures Commission. 

By comparison, the Shanghai Composite was down by around 12% in 2016, according to the SFC.

The BofaML report said that stocks on both boards have come under increasing selling pressure amid cooling sentiment on new-economy stocks and the expected devaluation of the renminbi.

The Chinese market was volatile given worries about a succession of bubbles across different asset classes and regulatory tightening to address market risks, the SFC said. In addition, the market dropped in early 2016 due to concerns about the economic outlook and a weakening of the renminbi.

ETF competition

Currently, Yuanta already has four funds tracking indices in mainland China – three tracking the CSI 300 Index and one tracking the SSE 50 Index, according to information from the TWSE.

Fubon Asset Management, a close competitor of Yuanta in Taiwan’s ETF market, also has four ETFs tracking indices in the mainland. In total, there are 13 ETFs in Taiwan tracking the domestic market in China.

Both Yuanta and Fubon dominate Taiwan’s ETF industry. Together they manage 26 and 23 ETFs, respectively, out of the nearly 70 listed. 

This month, Yuanta had three ETF product applications approved by the TSE: the S&P Japanese Yen Futures 2x Leverage Daily Index ER, the S&P Japanese Yen Futures 1x Inverse Daily Index ER and the S&P GSCI Gold 2x Leverage Daily Index ER.

It was also announced by the exchange that Fubon’s Nasdaq-100 2X Leveraged Index ETF and the Nasdaq-100 -1X Inverse Index ETF were listed on February 21. 

Part of the Mark Allen Group.