China sees an ETF boom as investors wait for stocks to trough
By Jason Xue and Tom Westbrook
(Reuters) — Chinese stock investors are ploughing money into exchange-traded funds (ETFs) this year at the fastest pace on record as they choose to play a languid stock market passively and wait for it to trough.
The trend has also caught on as active fund managers in China struggle to make money and as Beijing uses ETFs to support stock markets and channel funding into strategic sectors such as technology and green energy.
ETFs, which are funds that typically track an index, have garnered more than 400 billion yuan ($55.97 billion) this year in what would be record annual net inflows, according to mutual fund house China Asset Management Co (ChinaAMC), which has the biggest market share in the products.
«When the market falls, many investors would use ETFs to bet on a bottom,» said Xu Meng, executive general manager of quantitative investment at ChinaAMC, which emulates global ETF giants Vanguard and BlackRock (NYSE:BLK) iShares.
In contrast, active equity and allocation funds have suffered net outflows of roughly 36 billion yuan, as investors «have been looking for better value propositions in ETFs,» said Morningstar senior analyst Andy Huang.
An index tracking China's active equity funds has slumped roughly 12% so far this year as the country's post-pandemic economic recovery struggles for traction. That compares with a 1.9% fall in the benchmark Shanghai Composite Index.
«I have been gradually exiting active funds, and swapping into ETFs,» said retail investor Simon Zhang, who was disillusioned by active fund managers' underperformance.
Total assets under management (AUM) at China's stock ETFs jumped 33% during the Jan-Sept period to 1.48 trillion yuan, while active equity funds'
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