Smart Beta ETFs Embraced Amid A-Share Downturn
In the face of China’s stock-market slump, two Hong Kong exchange-traded funds (ETFs) that debuted a year ago are posting growth, reflecting increased holdings of Chinese stocks in foreign portfolios and the funds’ unconventional investment strategies.
The two major mainland bourses tumbled to near four-year lows Thursday, recording their biggest daily declines in 2½ years. While this week’s volatility is part of a global pullback, the two main Chinese benchmarks have struggled in bear territory this year on concerns about China’s slowing economic growth and the worsening trade war with the U.S.
Assets of the Premia CSI Caixin China Bedrock Economy ETF rose 45% since its launch a year ago, and the Premia CSI Caixin China New Economy ETF gained nearly 20%. The two ETFS are derived from smart beta indexes developed by Caixin Rayliant, a sister company of Caixin Global. Hong Kong-based Premia Partners manages the ETFs.
Smart beta ETFs allocate assets based on factors such as volatility, dividends and other “anomalies.” Pure beta strategies do not capture such factors and instead passively follow indexes built on market capitalization and share prices.
In China’s A-share stock market, products with smart beta elements account for less than 0.2% of all ETFs. The uptake of these strategies has been slow in China, partly because passive investing is less popular than active investing, especially among retail customers who are after short-term gains.
China’s first smart beta product was the Jiashi Fundamentals 50, a listed open fund that started trading on the Shenzhen stock exchange in 2009. Factor drivers for the fund, co-developed by China Securities Index Co. Ltd. and Rayliant Global Advisors, are sales, cash flow, net assets and dividends. The fund’s assets declined 16% to 1.6 billion yuan during past year.
The Premia CSI Caixin China Bedrock Economy ETF, with assets of 456 million yuan as of Oct.10, or less than a third the size of the Jiashi fund, focuses on companies leading China’s mainstream economy. The Premia CSI Caixin China New Economy ETF, with 406 million yuan of assets, tracks listed new-economy companies based on nonfixed assets and growth characteristics.
Liu Wen, a Caixin Rayliant analyst, said the expansion of the two A-share ETFs reflects the growing exposure of China’s domestic stock market to foreign investors. The inclusion of A-shares in the MSCI and FTSE Russell indexes attracted more investment in Chinese shares, Liu said.
As markets decline, investors prefer ETFs to better hedge risks, Liu said.
“Compared to ordinary ETFs, smart beta ETFs adopt more delicate asset selection that allows them to outperform the market” for mid- and long term investments, Liu said.
In the U.S., about $1 in every $4 flowing into ETFs this year has gone to smart-beta strategies, boosting assets to 22% of the overall U.S. ETF market, according to Bloomberg.
Contact reporter Han Wei (email@example.com)
May 20 18:56
May 20 18:10
May 20 16:29
May 20 16:52
May 20 14:33
May 20 13:05
May 20 12:21
May 20 10:24
May 18 05:15
May 18 05:03
May 18 04:08
May 17 18:39
May 17 18:55
- 1Opinion: Jack Ma’s ‘669’ Sex Joke Reinforces Tech’s Culture of Gender Harassment
- 2China Boosts Hydrogen Fuel Cell Investment in Green Energy Push
- 3Jack Ma Faces Backlash for Telling Employees How Often to Have Sex
- 4In Depth: Surveillance Equipment Giant Hounded by Competition, Security Concerns
- 5Huawei to Seek Remedies in Face of U.S. Ban
- 1Power To The People: Pintec Serves A Booming Consumer Class
- 2Largest hotel group in Europe accepts UnionPay
- 3UnionPay mobile QuickPass debuts in Hong Kong
- 4UnionPay International launches premium catering privilege U Dining Collection
- 5UnionPay International’s U Plan has covered over 1600 stores overseas