ETFs come to China with a vengeance
BEIJING — China has joined the global craze over exchange-traded funds, the investment product that lets traders buy and sell a basket of stocks.
Better known as ETFs, the funds surged in popularity in the U.S. after the financial crisis, and built $3 trillion businesses like BlackRock's iShares ETF brand.
In mainland China, ETFs have multiplied faster than the stock market. In five years, the number of ETFs more than quadrupled to 645, while the number of stocks rose by a mere 53% to 4,615.
That's according to official data and a report from Hong Kong Exchanges and Clearing, which also stated the mainland ETF market has become a 1.4 trillion yuan ($209 billion) business, more than tripling in just five years.
A regulatory change that took effect Monday opened that ETF market to overseas investors via Hong Kong — a program called the ETF Connect.
Beijing-based ChinaAMC, which said it launched the first ETF on the mainland in 2004, rode the industry's surge and operates 10 of the funds eligible for trading under the new cross-border trading program. Those include ETFs tracking indexes and themes like semiconductor development.
The ETF Connect leans heavily toward the mainland. Of the initial batch of eligible ETFs, 83 are listed on the mainland, versus just four in Hong Kong.
Goldman Sachs predicts $80 billion more in purchases of mainland assets versus those in Hong Kong over the next 10 years.
«Adding Northbound ETFs to one's A-share portfolio could potentially expand the efficient frontier and improve the risk/reward,» Goldman Sachs analysts wrote in a report this week. «While the initial Southbound eligible universe looks narrow, the underlying constituents still offer mainland investors broad exposure to HK-listed
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