Value Partners Asset Management Malaysia has launched a Shariah China A-Shares 100 ETF, which tracks the performance of the Dow Jones Islamic Market China A-Shares 100 Index, according to a statement from Value Partners, the issuer’s parent.
“Our new Shariah China A-Shares ETF is a unique tool for Malaysian investors to capture opportunities in China’s new economy within Shariah principles,” said Durraini Baharuddin, managing director of Value Partners Malaysia.
The Shariah China A-Shares ETF adopts a full replication strategy, in which the ETF will hold every constituent of the benchmark Index, having substantially the same weightings. The product is also Value Partners Malaysia’s first ETF to be listed on the Bursa Malaysia.
The ETF provides investors with exposure to Shariah-compliant stocks within the China A-Shares equity universe. The quantitative criteria adopted by the benchmark index means that it has significant weightings to companies within China’s “new economy”, including sectors such as technology, consumption, healthcare and 5G.
Shariah mutual fund AUM in Southeast Asia have expanded steadily, recording a compound annual growth rate of 12.4% from 2016 to 2020, according to a recent report by Boston-based Cerulli Associates. The segment’s market share is now more than 20% of Southeast Asia’s total mutual fund AUM, and Cerulli believes it should increase as the industry matures.
The Shariah methodology for adopted for Value Partner’s new ETF requires companies to be screened on two levels.
The first is a sector-based screen, where companies in the so-called “sin” sectors (such as alcohol, tobacco, and gambling), pork-related products, conventional financial services, and weapons and defence, are excluded. The second is a quantitative screening of liquidity and total debt, based on specified and approved metrics.
To meet its investment objective, the Shariah China A-Shares ETF can invest up to 100% of its net asset value in authorised securities, with an option to invest a maximum of 10% in Islamic collective investment schemes, Islamic money market instruments and/or Islamic deposits.
The ETF is managed by Value Partners Malaysia and holds physical shares as underlying investments, and it is the firm’s flagship offering to individual and institutional investors in Malaysia.
Investors can buy and sell units of the Shariah China A-Shares 100 ETF from 28 July 2021, with a minimum board lot size of 100 units. It will be launched at an initial issue price of MYR2.00 per unit ($0.48).
The Dow Jones Islamic Market China A-Shares 100 Index outperformed the CSI 300 Index by delivering a three-year cumulative return in ringgit of 80.7% compared with 66.2% for the CSI 300 Index, as of 29 June 2021, according to Value Partners. The top three sectors of the benchmark index comprise industrials (31.5%), healthcare (26.3%) and consumer goods (16.5%).
“We have a positive outlook on foreign capital inflows into Chinese markets and continue to remain optimistic. China’s continued efforts of developing and improving market accessibility over the years have made the market too big for investors to ignore,” said Kamal Mustadza, fund manager of Value Partners Malaysia.