Asia ETF Roundup (Industry) – November 2015

MSCI Inclusion of "Foreign Listed Companies"
One of the noteworthy changes in the Chinese equity space that we had been anticipating is MSCI’s inclusion of “foreign listed companies” (e.g. Alibaba, Baidu) into their standard indices, effective 30 November 2015. The MSCI China Index and MSCI Emerging Markets Index will be adding 14 foreign-listed companies. The change will be implemented in two phases. Half the foreign listed companies’ free float-adjusted market cap will be added in November 2015 and the remaining half in May 2016.

Singapore RQFII Quota Doubles to Rmb 100 billion
After the state visit to Singapore by the President of China, Xi Jinping, Singapore was granted with additional RQFII quota. Singapore’s quota has been doubled from Rmb 50 billion to Rmb 100 billion. The quota allows qualified institutional investors in Singapore to use the Renminbi to invest directly in the Chinese securities market. According to Monetary Authority of Singapore (MAS), this expansion is a response to the strong interest amongst Singapore-based asset managers and investors to invest in China.

As of 30 October 2015, Rmb 31.5 billion (i.e. 63% of the original Rmb 50 billion quota) has been granted to Singapore-based fund managers, according to the State Administration of Foreign Exchange of China. Other countries with RQFII quota include: Hong Kong (Rmb 270 billion), Taiwan (Rmb 100 billion; received a favourable response from the Chinese government but have not yet been officially granted quota), the UK (Rmb 80 billion), France (Rmb 80 billion), South Korea (Rmb 80 billion), Germany (Rmb 80 billion), Qatar (Rmb 30 billion), Canada (Rmb 50 billion), Australia (Rmb 50 billion), Switzerland (Rmb 50 billion), Luxembourg (Rmb 50 billion) and Chile (Rmb 50 billion).

New Product Coming to Malaysia – World’s First Islamic Agriculture-related ETF
i-VCAP, a Malaysian ETF manager, launched the world’s first agriculture-related Islamic ETF, namely the MyETF Thomson Reuters Asia Pacific ex-Japan Islamic Agribusiness (0826EA). The ETF tracks the Thomson Reuters Asia Pacific Ex-Japan Islamic Agribusiness Index which is comprised of the 30 largest Shariah-compliant companies primarily engaged in upstream agricultural production activities within the Asia Pacific region. The ETF was listed on the Bursa Malaysia on 3 December 2015.

Hang Seng Withdraws 2 ETFs Listing from Taiwan; iShares Delisting 2 ETFs in Hong Kong
The Hang Seng Index ETF (02833 listed in HK; 0081 listed in Taiwan) and the Hang Seng H-Share Index ETF (02828 listed in HK; 0080 listed in Taiwan) will be delisted from the Taiwan Stock Exchange (TWSE) from 9 December 2015. In the announcement made by the ETF’s manager, it stated that “as there are more channels in the market which allow Taiwan investors to directly invest in Hong Kong/mainland China related securities markets, the trading volume and the asset under management of the Fund in Taiwan have been decreasing gradually and it is not in the best interest of the Fund to continue the listing of the Fund on the TWSE.”

As we have mentioned previously, delisting ETFs that bring little economic benefit to the ETF providers is a common outcome, one that we see in every market. Other upcoming delistings in the pipeline include the Hong Kong listings of iShares MSCI Asia APEX Mid Cap Index ETF (03032) and the iShares MSCI Asia APEX Small Cap Index ETF (03004). These funds ceased trading in October 2015 and are expected to be delisted on or around 18 December 2015.

iShares A-Share ETFs Make Adjustments to NAV on China CGT
On 24 November 2015, iShares announced it would make adjustments to the net asset values of the iShares CSI 300 A-Share Index ETF (02846) and its suite of iShares CSI sector ETFs (03050, 03039, 02829, 03006, 03001, 02841). The adjustments relate to the A-Shares capital gains tax (CGT) amounts withheld by the funds’ CAAP issuers. The adjustments are anticipated to range from +0.07% to +12.97% of these funds’ NAVs. The NAV of the iShares FTSE A50 China Index ETF (02823) is expected to be adjusted +1.26% and the adjustment to the iShares CSI 300 A-Share Index ETF (02846) is expected to amount to +0.82%. Additional details on these adjustments can be found in the accompanying announcement. Investors should note that further announcements may be forthcoming, and hence there could be further adjustments.

RQFII ETF Watch – Outflows from RQFII ETFs Estimated at Rmb 5.0 billion

• In November, RQFII ETFs recorded estimated net outflows of Rmb 5.0 billion (13% of beginning and 15% of ending AUM). This compares to net inflows of Rmb 4.1 billion recorded in October. For the year to date, total net outflows are estimated at Rmb 20.2 billion.
• The majority of the net outflows during the month came from the CSOP FTSE China A50 ETF (82822 & 02822), estimated at Rmb 3.0 billion, followed by the ChinaAMC CSI 300 Index ETF (83188 & 03188), estimated at Rmb 1.9 billion and the E Fund CSI 100 A-Share Index ETF (83100 & 03100), estimated at Rmb 1.3 billion. On the other hand, there were net inflows into the CSOP China 5-Year Treasury Bond ETF (83199 & 03199), estimated at Rmb 1.2 billion.
• The largest A-Share ETF by AUM in Hong Kong, iShares FTSE A50 China Index ETF (02823) recorded net outflows in November, estimated at Rmb 1.4 billion. This compares to virtually zero net flows in October. For the year to date, total net outflows from the iShares FTSE A50 China Index ETF are estimated at Rmb 36.0 billion.

New Launches and Listings 

Fubon Lists an ETF in Taiwan
On 6 November 2015, Fubon Asset Management (Taiwan) listed an ETF on the Taiwan Stock Exchange, namely the Fubon TOPIX ETF (00645). The ETF tracks the performance of the Tokyo Stock Price Index (TOPIX), which is a capitalization-weighted index of all companies listed on the First Section (i.e. large-cap companies) of the Tokyo Stock Exchange. Prior to this, Fubon also listed two TOPIX-related ETFs in September, namely the Fubon TOPIX Leveraged 2X Index ETF (00640L) and Fubon TOPIX Inverse -1 Index ETF (00641R).

The listing of this ETF puts the total number of ETFs listed in Taiwan at 34.

EIP Lists a Strategic-beta ETF in Hong Kong
On 11 November 2015, Enhanced Investment Products (EIP, manager of ETFs under the “Xie Shares” brand) listed a strategic-beta ETF on the Stock Exchange of Hong Kong, namely the XIE Shares CLSA GARY ETF (03102). The ETF tracks the CLSA GARY Net Total Return Index. This index universe captures globally listed stocks (excluding A-Shares listed on the Shenzhen and Shanghai Stock Exchanges) where the company’s country of primary operations is in the Asia Pacific ex-Japan region. Constituents are selected based on CLSA’s “Growth At a Reasonable Yield” (GARY) strategy, which is a quantitative screening process based on dividend yield, growth, quality and dividend sustainability. The index constituents are equal-weighted and there were 69 constituents as of 19 October 2015.

Mirae and Kiwoom List New ETFs in Korea
During the month, Mirae Asset and Kiwoom Asset Management each listed an ETF. The Tiger KOSDAQ150 ETF (A232080) launched by Mirae Asset tracks KOSDAQ150 index; whereby the KOSEF Synth-USD Futures Inverse 2X ETF (A230480) launched by Kiwoom is a synthetic ETF which aims to deliver twice the inverse daily volatility of the F-USDKRW Index.

The listing of these ETFs puts the total number of ETFs listed in Korea at 200.

CSOP Lists a RQFII ETF in Hong Kong
On 26 November 2015, CSOP Asset Management listed an RQFII ETF on the Stock Exchange of Hong Kong. The ETF, namely the CSOP MSCI China A International ETF (03149, 83149), which tracks the MSCI China A International Index. The index captures large and mid-cap equities and includes the China A-Shares consitutients of the MSCI China All Shares Index.

These listings and the Xie Shares ETF listing put the total number of ETF listings in Hong Kong at 161 (133 ETFs and 28 dual counters).

List of ETFs Launched in November 2015