Asia ETF Roundup (Industry) – November 2017

For more details on changes within the sector and industry groups, please refer to the press release on the MSCI website. After the implementation on 28 September 2018, the new GICS structure will include 11 Sectors, 24 Industry Groups, 69 Industries and 158 Sub-Industries. For Morningstar’s own analysis of the forthcoming changes, please see this article.

HK SFC Consultation Conclusion: Enhancing Disclosures; But Not Yet Pay-For-Advice Model
Hong Kong’s SFC issued a consultation conclusion, which presented public comments and SFC’s subsequent response on the topic of enhancing asset management regulations and point-of-sale transparency. More pertinent to the ETF industry, the consultation’s conclusions revealed that the majority of the respondents viewed Hong Kong as being “not ready for pay-for-advice model (i.e., banning commissions) at this juncture” and “concerned that a pay-for-advice model could result in the emergence of an advice gap”. With these reasons, the SFC will therefore adopt a two-pronged approach (governing the conduct of intermediaries; and enhancing the disclosure of monetary benefits at the point of sale). Nevertheless, the SFC recognises the positives that could arise from a pay-for-advice model such as its ability to “facilitate competition and drive down fees” and will “keep pay-for advice model under active consideration”.

The consultation conclusions can be found on SFC’s website.

HK SFC Consults Industry on Possible Inclusion of Actively-Managed ETFs
According to Ignites Asia’s various industry sources, Hong Kong’s SFC is currently consulting with industry participants on their “initial interest and opinion on active ETFs, and it plans to launch a proposal on the products as part of a wider unit trust code consultation before the end of the year”. In the Asia-Pacific region, Korea and Australia already have actively-managed ETFs on their menus.

HSI and HSCEI Constituent Changes
Effective on 4 December 2017, the following changes will be made to the Hang Seng Index (HSI) and the Hang Seng China Enterprises Index (HSCEI).

• HSI: 2 additions: Country Garden Holdings (02007), Sunny Optical Technology (Group) (02382); 2 deletions: Kunlun Energy (00135), Cathay Pacific Airways (00293); The total number of index constituents remains unchanged at 50.
• HSCEI: 1 addition: Guangzhou Automobile Group- H Shares (02238); 1 deletion: China Longyuan Power Group (00916). The total number of constituents remains unchanged at 40.

MSCI Index Constituent Changes
According to MSCI’s November 2017 semi-annual review, the following constituent changes were made as follows, effective as of market close on 30 November 2017:

• MSCI Japan Index: 3 additions: Persol (2181), Sumco (3436), Daifuku (6383); 3 deletions: Chugoku Bank (8382), Hiroshima Bank (8379), Miraca (4544).
• MSCI Hong Kong Index: 2 additions: Kingston Financial (01031), Minth (00425).
• MSCI Taiwan Index: 5 additions: Airtac (1590), Macronix (2337), Win Semiconductors (3105), Winbond Electronics (2344), Yageo (2327); 4 deletions: Merida (9914), Taiwan Fertilizer (1722), Transcend Information (2451), Yulon Motor (2201).
• MSCI Korea Index: 3 additions: Celltrion Healthcare (091990), Ing Life Insurance Korea (079440), Sillajen (215600).
• MSCI India Index: 3 additions: Britannia Industries (BRITANNIA), Petronet Lng (PETRONET), Vakrangee (VAKRANGEE); 1 deletion: Apollo Hospitals (APHS).
• MSCI China Index: 8 additions: Agile (03383), BYD Electronic (00285), China Molybdenum (03993), China Resources Pharma (03320), Kingboard Chem (00148), Lee & Man Paper (02314), Meitu (01357), Nexteer Automotive (01316); 5 deletions: China Coal Energy H (01898), China Power (02380), Chongqing Changan Auto B (200625), Minth (00425), Sino Pec Eng H (02386).
• MSCI China A International Large Cap Provisional Index: 14 additions and 5 deletions. As a result, the number of China A-Shares that will be added into the Emerging Markets Index will be increased to 247 (from 222 A-Shares previously announced in June, and the changes made in the August review with 15 additions and 1 deletion).

Details of MSCI’s November 2017 semi-annual review can be found in MSCI’s press release and list of additions/deletions.

RQFII ETF Watch – Net Outflows in November Totaled Rmb 1.6 Billion

• RQFII ETFs recorded estimated net outflows of Rmb 1.6 billion in November 2017 (5% of beginning and ending AUM). This compares with net outflows of Rmb 0.7 billion in October. For the year-to-date through November RQFII ETFs have seen estimated net outflows of Rmb 1.7 billion.
• Almost all of the net outflows came from the CSOP FTSE China A50 (82822/02822) and the ChinaAMC CSI 300 Index ETF (83188/03188). The pair saw estimated net outflows of Rmb 0.9 billion and RMB 0.7 billion, respectively.
• The largest A-Share ETF by AUM in Hong Kong, iShares FTSE A50 China Index ETF (02823), recorded net outflows in November, estimated at Rmb 0.5 billion—comparable to the figure from the month prior. During the first eleven months of 2017, the estimated total net outflows from the iShares FTSE A50 China Index ETF amounted to Rmb 6.6 billion.

New Launches and Listings

CSOP to delist an ETF in Hong Kong
CSOP Asset Management announced on 16 November 2017 that it would delist the CSOP CES China A80 ETF (83137/03137), which tracks the CES China A80 Index. This delisting is mainly due to its small asset size, which stood at Rmb 6.4 million as of 16 November 2017. The last trading day for the ETF will be 18 December 2017.

Mirae to delist an ETF in Hong Kong
Mirae Asset Global Investment announced on 20 November 2017 that it would delist the Mirae Asset Horizons KOSPI 200 ETF (02835), which tracks the KOSPI 200 Index. This delisting is mainly due to its small asset size. The fund had HKD 39.7 million in assets under management as of 20 November 2017. The last trading day for the ETF will be 21 December 2017.

BOCI-Prudential delists 2 ETFs in Hong Kong
BOCI-Prudential Asset management delisted W.I.S.E. - CSI HK Listed Mainland Real Estate Tracker (02839) and W.I.S.E. - CSI HK Listed Mainland Consumption Tracker

(02817) on 7 November 2017, which tracked the CSI Hong Kong Listed Tradable Mainland Real and CSI Hong Kong Listed Tradeable Mainland Consumption Index, respectively. BOCI-Prudential Asset management delisted the ETFs mainly due to the relatively small net asset value of the funds and their low trading volume.

The delisting of these 4 ETFs, puts the year-to date completed and proposed ETF de-listings in Hong Kong at 32, of which 17 were managed by Deutsche Asset Management.

Lion De-lists an ETF in China
On 8 November 2017, Lion Fund Management delisted an ETF on the Shenzhen Stock Exchange. The ETF tracked the SZSE SME Equal Weighted Index.

KB and Samsung List 7 ETFs in Korea
During the month of November, KB Asset Management listed three ETFs on the Korea Exchange. They track the FnGuide Mid Small Cap High Dividend Focus Index, the F-KTB Index and the WISE Holdings Company Theme Index(Price Return), respectively.

In addition, Samsung Asset Management listed four ETFs on the Korea Exchange during the month. They track the MSCI Korea TR Index, the FTSE Russell 2000 Index, the S&P GSCI GOLD Index Excess Return and the KOSPI200 TR Index, respetively.

These listings put the total number of ETFs listed in Korea at 311. 

Fubon, Paradigm List 3 ETFs in Taiwan
On 16 November 2017, Paradigm Asset Management listed a pair of leveraged and inverse ETF on the Taiwan Stock Exchange. They track the S&P GSCI Brent Crude 2X leveraged ER Index and the S&P GSCI Brent Crude 1X Inverse ER Index, respectively.

On 29 November 2017, Fubon Asset Management listed an ETF on the Taiwan Stock Exchange, which tracks the S&P U.S. Preferred Stock Index.

These listings put the total number of ETFs listed in Taiwan at 98.

ICICI Lists an ETF in India
On 28 November 2017, ICICI Prudential Asset Management listed an ETF, namely the Bharat 22 ETF (BHARATIWIN). The ETF tracks the S&P BSE Bharat 22 Index which comprises 22 companies within the Central Public Sector Enterprises (CPSE), companies with stacks held under the Specified Undertaking of the Unit Trust of India (SUUTI) and Public Sector Undertaking (PSU) Banks that are listed on the BSE, which are under the India government’s disinvestment program. This is the second ETF, after the CPSE ETF launched in March 2014, for divestment of the India government’s share holdings.