Asia ETF Roundup (Industry) – November 2020

Hang Seng Index Increases Number of Constituents to 52

On 13 November, Hang Seng Indexes released the result of the third-quarter index review on its benchmark series. With effect from 7 December, the number of constituents in the Hang Seng Index will be increased to 52 from 50 by adding three companies and removing one company. The total number of constituents of the Hang Seng China Enterprises Index and the Hang Seng TECH Index will remain unchanged at 50 and 30 respectively. The full result is available here.

Constituent changes at the November Index review:

Hang Seng Index

• Additions: Budweiser Brewing (01876), ANTA Sports Products (02020) and Meituan (03690)
• Removals: Swire Pacific (00019)
  
  

HSCEI

• Additions: Alibaba Health Information Technology (00241), China Overseas Land & Investment (00688), SMIC (00981), China Evergrande (3333), Hansoh Pharmaceutical (03692), China Feihe (06186), Haidilao (06862), JD.com (09618), NetEase (09999)
• Removals: Want Want China (00151), Fosun International (0656), China Telecom (00728), China Taiping Insurance (00966), China CITIC Bank (00998), China Shenhua Energy (01088), China Minsheng Banking (01988), China Vanke (02202), PICC Property and Casualty (02328)
  
  

Hang Seng TECH Index

• Additions: Ming Yuan Cloud (00909), Archosaur Games (09990)
• Removals: HengTen Networks (00136), NetDragon Websoft (00777)
  
  

U.S. Executive Ban on China Stocks Spurs Uncertainty

On 12 November, U.S. President Donald Trump signed an executive order banning American investors from investing in 31 Chinese companies with ties to the Chinese military, effective from 11 January 2021. The lists of banned companies can be found here and here. The companies include well-known Chinese technology, telecommunication and manufacturing companies, such as China Mobile (listed as 00941 in Hong Kong, CHL in the United States), China Telecom (00728, CHA) and Huawei etc. Of the companies that are publicly listed, not including any subsidiaries or related companies, we estimate these represent around 1% of the total market capitalisation of the MSCI Emerging Markets Index as at 31 October 2020.

In response to the executive order, global index providers have initiated consultations to collect feedback from market participants on the impact of the order and the appropriate course of action for the affected indexes. Investors can view consultation documents for MSCI, FTSE Russell and S&P Dow Jones on their websites. FTSE Russell expected that the earliest index treatments, if implemented, will be effective on 21 December 2020 and is reviewing the impact of the order on its fixed income indexes. At this moment, investors, index providers, and asset managers have more questions than they do answers. We published an article “Recent U.S. Executive Order Affecting Certain Chinese Securities Confounds Investors” on 1 December which discusses the issues and potential impacts of the executive order on investors, index providers, and the asset-management industry.

STAR Stocks to be included in SSE and CSI Indexes

On 27 November, the Shanghai Stock Exchange (SSE) and China Securities Index Company announced it will include the Science and Technology Innovation Board (STAR) securities in some benchmark indexes, including the SSE 180 Index and the CSI 300 Index. Stocks with a listing history of over a year would be eligible for inclusion. The adjustment will be implemented in the next periodical index review on December 14. The full adjustment details can be found here and here, which include one and four STAR stocks to be added to the SSE 180 index and the CSI 300 Index, respectively.

Chinese Equity ETF Watch – Hong Kong-Domiciled Onshore Chinese Equity ETFs See Estimated Net Outflows of USD 0.2 billion; US-Domiciled ETFs See Estimated Net Inflows of USD 1.7 billion

• Hong Kong-domiciled ETFs in the China Equity Category saw small net inflows, estimated at USD 9 million in November.
• Hong Kong-domiciled ETFs in the China Equity - A-Shares Category saw estimated net outflows of USD 170 million in November, coming mainly from the iShares FTSE A50 China ETF (02823/82823), and CSOP FTSE China A50 ETF (02822/82822) which recorded net outflows estimated at USD 88 million and USD 57 million, respectively.
• Hong Kong-domiciled ETFs in the China Equity Category and the China Equity – A-Shares Category saw estimated year-to-date outflows of USD 0.8 billion and USD 2.8 billion, respectively.
• In the U.S. in November, we estimate net inflows of USD 1.7 billion into the ETFs in the China Region Category. The KraneShares CSI China Internet ETF (KWEB), the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) and the iShares China Large-Cap ETF (FXI) each had net inflows estimated at USD 0.3 billion.
  
  

New Launches and Listings

China: 6 ETF New Listings

• Chinese ETF providers listed 6 new ETFs on the Shanghai Stock Exchange. Five of these ETFs track the SSE Star 50 Index and the remaining one track the NASDAQ 100 index.
• These listings put the total number of ETFs listed in China at 369 (110 ETFs on the SZSE, 259 ETFs on the SSE).
  
  

Singapore: 1 ETF New Listing

• Nikko Asset Management Asia listed a bond ETF providing China government bond exposure on the Singapore Exchange.
• These listings put the total number of ETFs listed in Singapore at 42 (30 ETFs and 12 multiple counters).
  
  

South Korea: 6 ETF New Listings

• Korean ETF providers listed 4 thematic ETFs, a leveraged ETF and a broad market ETF on the Korea Exchange. The thematic ETFs provide exposure to battery, bio, internet and gaming stocks.
• These listings put the total number of ETFs listed in South Korea at 463.
  
  

India: 1 ETF New Listing

• The first ESG ETF in India was listed by Mirae Asset Investment on the Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE), tracking the Nifty100 ESG Sector Leaders Index.
  
  

ETFs Launched in November 2020 in the Asia ex-Japan Region