ETF’s big splash in MSCI’s new Chinese index puts pressure on the FTSE China A50

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The MSCI logo can be seen in this illustrative photo from June 20, 2017. REUTERS / Thomas White / Illustration

SHANGHAI, Nov. 8 (Reuters) – Just two months after MSCI introduced its Chinese mega-cap index, the first exchange-traded funds (ETFs) following the new index began trading in China on Monday, armed with $ 4 billion. dollars, corresponding to the long-established FTSE China A50 silver tracking.

The meteoric debut of the four ETFs – two in Shanghai and two in Shenzhen – came after the fund, based on the MSCI China A50 Connect Index (.MICN0A5C0PCY), raised 26.7 billion yuan (4.17 billion yuan). dollars) in China.

This puts the MSCI index, launched on August 20, at virtually the same level as the roughly $ 4 billion global ETFs that currently track rival FTSE China A50 (.FTXIN9C), launched in 2003.

Global index publishers are in a fierce battle to woo investors with innovative tools for betting in the giant Chinese “A-share” market, and MSCI’s great success will put pressure on FTSE Russell to come up with something. something new.

After seeing investor interest in its flagship Chinese A-share index wane in recent years, FTSE Russell, which is part of the London Stock Exchange Group (LSEG.L), said on Friday it had recently launched consultations with market participants regarding the use of its China A index offering, and reviewed the results for possible changes.

The FTSE China A50 has a large impact in the market, but MSCI has the advantage of laggards, said Duan Shihua, director of Shanghai Changer Investment Management Consulting.

The winner of the duel must “understand the needs of investors, attract large investors and have a liquid derivative market” based on the index, he said.

RECORD TURNOVER

The four new ETFs – managed by China Asset Management Co (ChinaAMC) (159601.SZ), E Fund Management Co (563000.SS), China Southern Asset Management Co (159602.SZ) and China Universal Asset Management Co (560050.SS) ) – generated enormous interest on their first day of trading.

The combined turnover of the four ETFs has exceeded 10 billion yuan. ChinaAMC’s product debuted at 3.6 billion yuan, a record for a Chinese ETF.

The underlying MSCI China A 50 Connect index selects 50 mega-cap stocks in the A-share market, and fund managers who track the index say it takes a more balanced approach to sector allocation than the A-share market. FTSE A50.

“The index gives more weight to stocks in the new Chinese economy, such as new energy, technology and healthcare, while avoiding overweighting in financial or consumer staples,” said Jialiang Li, manager of fund at Southern Asset Management, which launched one of the MSCI A50 ETFs. .

The MSCI index is likely to become an investment indicator for foreign investors because it better reflects the Chinese economy, Li said during a road show ahead of the ETF’s launch.

MSCI has also partnered with Hong Kong Exchanges and Clearing Ltd (0388.HK) to launch futures products based on the MSCI China A50 Connect Index, challenging the SGX FTSE China A50 index futures on the Stock Exchange of Singapore.

FTSE Russell said that an ecosystem built around the FTSE China A50, including a liquid derivative market, is an “asset” for the index.

Reporting by Jason Xue and Andrew Galbraith Additional reporting by Samuel Shen Editing by Simon Cameron-Moore and Mark Potter

Our Standards: The Thomson Reuters Trust Principles.


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