Asia ETF Roundup (Industry) – February 2022

Consultation on Creating “New Comprehensive China Benchmark” using the HSCEI

On 15 February, Hang Seng Indexes launched a consultation to gather feedback on creating a new China index based on the popular Hang Seng China Enterprises Index (HSCEI). Recall that the HSCEI covers the largest 50 Hong Kong-listed Mainland companies and hence does not currently include A-shares. The consultation is soliciting feedback on the following:

(1)  China investment & asset allocation plan – including questions regarding respondents’ usage of China A-Shares.

(2)  Considerations in taking a “Comprehensive” approach to China investment – including questions on respondents’ views on constructing a “comprehensive” China benchmark, as well as how China A-Shares should be represented in such an index.

The consultation will be closed on 31 March. Hang Seng Indexes has not shared a date regarding the announcement of the results of the consultation. The full consultation paper can be viewed here[JC1] .

Hang Seng Index February 2022 Review – Constituent Count Increases to 66

Hang Seng Indexes released the results of the February 2022 review of its benchmark series. The total number of constituents in the Hang Seng Index will increase to 66 from 64, effective on 7 March. The full index review results, along with the latest pro forma weightings of the constituents in the Hang Seng Index can be viewed here[JC2] .

Constituent changes at the February Index review:

Hang Seng Index

• Additions: Lenovo Group (00992), Nongfu Spring (09633)

Hang Seng China Enterprises Index

• Additions: Xinyi Solar (00968)
• Removals: Evergrande Property Services Group (06666) 

Hang Seng TECH Index

• Additions: Sensetime Group (00020), Li Auto (02015), Xpeng (09868)
• Removals: Tongcheng Travel (00780), Weimob (02013), Autohome (02518)

HK SFC Streamlines Requirements for ETF’s Master-Feeder Structure

The Hong Kong Securities and Futures Commission revised its requirements on overseas-listed master ETFs. The previous fund size requirement of US$1 billion has been decreased to US$400 million and the required track record has also been shortened from 5 years to 1 year. The SFC circular can be found here.

Sanctions Related to Russia and Related Index Announcements

There have been a number of sanctions imposed by the US, EU and the UK against Russia. These include sanctions on certain individuals, enterprises, trade restrictions as well as the exclusion of certain Russian banks from Swift, an international payment system used by global financial institutions. The Moscow Exchange has been since 28 February.

Global index providers have consulted with market participants on the treatment of the Russian stocks. MSCI, FTSE Russell, and S&P Dow Jones Indices have announced they will remove Russian stocks from their indices and mark their values to zero. The changes will be effective at the open of 7 March and at the close of 9 March, respectively for FTSE Russell and MSCI. The MSCI ACWI and MSCI EM Indexes had respective weightings in Russian equities of around 0.19% and 1.61% as of 28 February.

Other index providers have taken similar measures:

• FTSE Russell: Removing Russia from indices and classify Russia as “Unclassified market”   
• Morningstar: Removing Russia from indices and classify Russia as “unclassified”
• MSCI: Removing Russian stocks from indices and reclassify Russia as “Standalone Markets”; Q&A reclassification
• S&P Dow Jones: Removing Russian stocks from indices and reclassify Russia as “Standalone”
• STOXX: STOXX announced to delete 61 Russian securities from its indices

Meanwhile, bond indices will exclude new issues from sanctioned issuers. Here are the relevant announcements from FTSE Russell and ICE.  

Chinese Equity ETF Watch – Small Net Flows into Hong Kong-Domiciled Offshore and Onshore Chinese Equity ETFs; Major US-Domiciled Chinese Equity ETFs See Net Inflows of USD 0.7 billion

• In Febraury, Hong Kong-domiciled ETFs in the China Equity Category and China Equity - A-Shares Category saw small net flows--estimated net inflows of USD 75 million and net outflows of USD 13 million, respecitvely.
• In the U.S. in February, we estimated net inflows of USD 0.4 billion from the iShares China Large-Cap ETF (FXI) and the iShares MSCI China ETF (MCHI) and net inflows of USD 0.3 billion from the KraneShares CSI China Internet ETF (KWEB).

New Launches and Listings

China: 14 ETF New Listings

• Chinese ETF providers listed 14 new ETFs on the Shanghai Stock Exchange and Shenzhen Stock Exchange in February 2022. These launches included 1 actively managed (enhanced strategy) ETF and 13 thematic/sector ETFs.
• These listings put the total number of ETFs listed in China at 664 (240 ETFs on the SZSE, 424 ETFs on the SSE).

Hong Kong: 1 New ETF Listings

• Hang Seng Investment Management listed an ESG ETF on the Hong Kong Exchange.
• This latest addition put the total number of ETFs listed in Hong Kong at 239 (155 ETFs and 84 multiple counters, including 28 leveraged/inverse products).

India: 3 New ETF Listings

• ETF providers in India listed a sector ETF, a commodity (silver) ETF and a strategic beta ETF on local exchanges in February.

South Korea: 7 ETF New Listings

• Korean ETF providers listed an actively managed ETF, 5 thematic ETFs, and a leveraged ETF on the Korea Exchange in February.
• These listings put the total number of ETFs listed in South Korea at 546.

Thailand: 1 New ETF Listing

• UOB Asset Management launched the first thematic ETF on the Stock Exchange of Thailand (SET).
• This listing put the total number of ETFs listed in Thailand at 17.

ETFs Launched in February 2022 in the Asia ex-Japan Region