Chinese ETFs Take Off in London

Terry Flanagan

The London Stock Exchange has listed a new exchange-traded fund allowing European investors to buy domestic Chinese stocks with another due to list later this month.

In a statement, the LSE said the CSOP Source FTSE China A50 UCITS ETF listed on January 9. The new ETF was launched by Hong Kong-based CSOP Asset Management and Source in the UK. It is linked to the FTSE China A50 Index, which includes the largest 50 A-share companies by full market capitalisation on the Shanghai and Shenzhen Stock Exchanges.

Source said in a statement that the new ETF had attracted net assets under management of 1.42bn renminbi ($230m).

Chen Ding, chief executive of CSOP, said in the statement: “There has been high demand for our Hong Kong-listed ETF and we expect similarly strong interest from Europe.”

CSOP’s Hong Kong-listed ETF has assets of 21bn renminbi according to the company.

On January 7 Deutsche Asset & Wealth Management and Harvest Global Investments opened an ETF to allows European investors to directly invest in domestic Chinese companies by tracking the CSI300 Index. The db x-trackers Harvest CSI300 Index Ucits ETF will list on the London Stock Exchange and Deutsche Börse on January 16.

Marco Montanari, managing director and head of passive asset management, Asia Pacific at Deutsche Asset & Wealth Management Hong Kong told Markets Media that the European listing had raised $95m.

Montanari expects rapid growth of ETF assets invested in Chinese equities as the country’s economy continues to expand. “European and US investors have less than 2% of equity ETF assets invested in China. In five to ten years time this should logically be more than 10%,” he said.

The UK Treasury said in a statement that the launch of the ETF on the London Stock Exchange underlines the UK’s position as the western centre for offshore renminbi.

China’s Renminbi Qualified Foreign Institutional Investor (RQFII) programme allows institutional investors with offshore Renminbi deposits to invest back into the domestic Chinese market. CSOP has been granted a quota specifically for the new ETF which is denominated in renminbi and trades on London Stock Exchange in US dollars and sterling.

The UK was awarded the first RQFII quota outside Greater China, and the Prudential Regulation Authority has agreed to consider applications from Chinese banks to establish wholesale branches in the UK.

Sajid Javid, financial secretary to the Treasury, said in the statement: “The launch of the first RQFII ETF in London is the latest step in this success story. I hope that this partnership will pave the way for further collaboration between UK and Hong Kong based asset managers.”

In December the UK government also said it would abolish stamp duty and stamp duty reserve tax on purchases of shares in exchange traded funds that are domiciled in the UK, allowing UK exchange traded funds to launch in London for the first time.

Related articles