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Asia ETF Roundup (Industry) – March 2021

BOJ amends ETF purchase plan; FTSE to add Chinese government bonds over a 36-month timeframe.

Jackie Choy, CFA 08.04.2021

For economic and market news relating to Asian ETFs, please refer to our “Asia ETF Roundup (Market) – March 2021”.

ETF Industry News

Bank of Japan ETF Purchase Plan Change: Only Buys TOPIX ETFs; No longer a JPY6 trillion Target and Conduct Purchases Nimbly

On 19 March 2021, the Bank of Japan announced it would amend its ETF purchase plan to only buy ETFs tracking the broader Tokyo Stock Price Index (TOPIX), which is constituted of approximately 2,200 stocks, from 1 April 2021. The Bank previously targeted to use 75% proceeds to purchase ETFs tracking the TOPIX and 25% to purchase ETFs tracking the TOPIX, Nikkei 225 Stock Average and JPX-Nikkei Index 400.

Meanwhile, the Bank also decided to retain the JPY 12 trillion upper ceiling introduced in March 2020. However, the Bank no longer mentioned its JPY 6 trillion annual ETF purchase target. The Bank also cited in its Summary of Opinions at the Monetary Policy Meeting that “It is desirable for the Bank to conduct purchases of assets such as ETFs nimbly.”

FTSE Russell Will Include China Government Bonds in Its Fixed Income Index

On 29 March 2021, FTSE Russell released the result of country classification for its FTSE World Government Bond Index (WGBI). Chinese government bonds will be included in the WGBI and other related indices such as FTSE World Broad Investment Grade Index (WorldBIG). The inclusion will commence on 29 October 2021 over a 36-month timeframe rather than the earlier-proposed 12-month period announced in September 2020. According to FTSE Russell, the longer implementation was the result of the feedback received from it market consultation in light of the passive nature of index mandates, the material monetary inflows and the need of longer onboarding time to access the market by some users. FTSE Russell also cited a number of market enhancements being observed on the Chinese government bonds, including (1) the accounting opening process; (2) the option to transact foreign exchange with third parties; and (3) the freedom to lengthen the settlement cycle beyond T+3.

Fee Reduction and Renaming of iShares FTSE A50 China ETF

BlackRock/iShares, manager of iShares FTSE A50 China ETF (02823/82823; listed in Hong Kong), announced a management fee reduction to 0.35% from 0.99% per annum. Also, the ETF has been renamed iShares FTSE China A50 ETF. Both amendments became effective from 22 March 2021.

Updates on the U.S. Executive Order – Xiaomi Injunction and Index Providers Updates

Executive Order Updates

On 14 March 2021, the Office of Foreign Assets Control issued 2 more FAQs (880 and 881) in relation to Xiaomi and Luokung:

  • FAQ 880 stated that the Executive Order did not apply to Xiaomi Corporation as Xiaomi was granted a preliminary injunction by the court on 12 March 2021 against the implementation and enforcement of the Executive Order.
  • FAQ 881 stated that Luokung Technology Corp. (LKCO), previously listed by the Secretary of Defense as “Luokong Technology Corporation (LKCO)”, is subject to the Executive Order and the prohibition will take effect on 8 May 2021.

 

Index Provider Updates

  • FTSE Russell and S&P Dow Jones announced on 5 March and 10 March, respectively, prior to the U.S. Court’s decision on Xiaomi Corporation, to remove Xiaomi (01810, XIACY), Advanced Micro-Fabrication Equipment Inc. (688012, AMEC) and Luokung Technology Corp. (LKCO) from their indices.
  • Following the Court’s decision, MSCI decided not to proceed with the removal of Xiaomi (01810, XIACY) from their indices, subject to the further conclusion of the Court. Meanwhile, FTSE Russell and S&P Dow Jones will consider Xiaomi eligible for inclusion in their indices at the next quarterly index rebalancing in the second quarter.

 

Chinese Equity ETF Watch – Hong Kong-Domiciled Offshore Chinese Equity ETFs See Estimated Net Inflows of USD 0.2 billion; Onshore Chinese Equity ETFs See Estimated Net Outflows of USD 0.2 billion

  • Hong Kong-domiciled ETFs in the China Equity Category saw net inflows estimated at USD 249 million in March, mainly coming from the Hang Seng China Enterprises Index ETF (02828/82828).
  • Hong Kong-domiciled ETFs in the China Equity - A-Shares Category saw estimated net outflows of USD 171 million in March, coming mainly from the ChinaAMC CSI 300 Index ETF (83188/03188), the CSOP FTSE China A50 ETF (02822/82822) and the iShares FTSE China A50 ETF (02823/82823), which recorded estimated net outflows of USD 93 million, USD 45 million and USD 40 million, respectively.
  • Hong Kong-domiciled ETFs in the China Equity Category and the China Equity – A-Shares Category saw estimated year-to-date outflows of USD 0.2 billion and USD 0.4 billion, respectively.
  • In the U.S. in March, we estimated net inflows of USD 0.6 billion from the iShares China Large-Cap ETF (FXI) and the iShares MSCI China ETF (MCHI). We estimated net outflows of USD 95 million from the Xtrackers Harvest CSI 300 China A ETF (ASHR).

 

 flows

New Launches and Listings

China: 40 ETF New Listings

  • Chinese ETF providers listed 40 new ETFs on the Shanghai Stock Exchange and the Shenzhen Stock Exchange. There are 35 thematic/sector ETFs and 5 broad market ETFs.
  • Including the above listings, the total number of ETFs in China stands at 441 (138 ETFs on the SZSE, 303 ETFs on the SSE).

 

Hong Kong: 4 ETF New Listings

  • Hong Kong ETF providers, including ChinaAMC, Harvest Fund and Mirae Asset listed 4 ETFs on the Hong Kong Exchange, including one active ETF.
  • These listings put the total number of ETFs listed in Hong Kong at 231 (146 ETFs and 85 multiple counters, including 24 leveraged/inverse products).

 

South Korea: 1 ETF New Listing

  • Mirae Asset listed an ETF on the Korea Exchange, tracking the FnGuide Renewable Energy Index.
  • These listings put the total number of ETFs listed in South Korea at 467.

 

Taiwan: 3 ETF New Listings

  • SinoPac SITC listed 3 ETFs on the Taipei Exchange. These include two thematic/sector ETFs and one ESG ETF.
  • These listings put the total number of ETFs listed in Taiwan at 219, of which 97 are bond ETFs.

 

ETFs Launched in March 2021 in the Asia ex-Japan Region  

Listings

About Author

Jackie Choy, CFA  Jackie Choy, CFA is the Director of ETF Research for Morningstar Investment Management Asia

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