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Guotai Asset Management Company, one of the earliest professional fund management companies in China, has revealed plans to launch the country’s first cross-border exchange-traded fund (ETF).
To be listed on the Shanghai Stock Exchange, the Guotai Nasdaq-100 ETF (513100) will enable Mainland China-based investors to physically track the technology-heavy Nasdaq-100 Index.
The emergence of cross-border ETFs on local stock markets such as the Shanghai and Shenzhen exchanges will significantly enhance the trading efficiency of overseas investments for Chinese investors, allowing them to avoid the lengthy cycle of redeeming ordinary Qualified Domestic Institutional Investor funds.
The launch of the Guotai Nasdaq-100 ETF is a milestone for the Shanghai Stock Exchange in its trend toward internationalisation and also for the growth of the international ETF market.
Robert Hughes, Vice President at Nasdaq OMX, provider of the Nasdaq-100 index, said: “There is a growing demand for overseas products in China and the Shanghai Stock Exchange and Guotai Asset Management have paved the way for individual and institutional investors in China to access 100 of the world’s largest and most dynamic non-financial companies including Baidu, Apple, Microsoft and Starbucks. We applaud the Shanghai Stock Exchange and Guotai for pursuing this innovative investment solution that had not been previously available to investors in China.”
The Nasdaq-100 Index, which includes some of the world’s most innovative high-tech growth companies, such as Apple, Facebook, Amazon and Google, is one of the best-known stock benchmarks, alongside indices such as the S&P 500, FTSE 100, Hang Seng and Nikkei 225. It has also been one of the strongest performers. According to Bloomberg, the index’s accumulated rise in the past decade was 163.8%, as of 31 December, 2012, approximately four times the return of the Shanghai Composite Index during the same period.
The Guotai Nasdaq-100 ETF is also the second among three major innovative products underwritten by Guotai since the end of last year. The company’s government bond ETF, the Guotai SSE 5-Year China Treasury Note ETF (511010), launched less than a month ago has become the most heavily traded ETF product on the Shanghai and Shenzhen Stock Exchanges.
China – including Hong Kong – represents a huge growth opportunity for ETF companies, and recent product launches suggest the industry there could boom. The success of funds such as the ChinaAMC CSI 300 Index ETF (510330) and CSOP FTSE China A50 ETF (02822), which have both accumulated assets heading towards $3 billion despite their short existence, is a manifestation of the demand for ETF products.
International index groups have also recognised the potential, with FTSE, MSCI and Stoxx all recently rolling out A-share indices (Chinese A-shares are traded in local currency (Renminbi) on domestic stock exchanges and are reserved for mainland-based enterprises and individuals, and qualified foreign institutional investors).
Among the Western index providers, FTSE Group may have an edge after teaming up with Shenzhen Securities Information (SSI), a subsidiary of the Shenzhen Stock Exchange. Under their agreement, SSI and FTSE will undertake index-related research and development projects and leverage one another’s strengths to facilitate and promote the launch of new indices for China’s capital markets.