First A-share ETF gets a lukewarm response in HK

PUBLISHED : Wednesday, 18 July, 2012, 12:00am
UPDATED : Wednesday, 18 July, 2012, 12:00am


The first A-share exchange-traded fund attracted only 103.37 million yuan (HK$125.78 million) of trading in its debut on the Hong Kong stock exchange - a disappointing result that brokers blamed on the poorly performing mainland stock markets and difficulties in obtaining yuan.

An ETF, which is traded like any other stock, is an index fund which allows buyers to invest in a basket of stocks. The China Asset Management (CAM) ETF is the first A-share ETF which allows Hong Kong investors to bet on the CSI 300 Index, the components of which are the 300 A shares with the largest market capitalisation and best liquidity on the Shanghai and Shenzhen exchanges. The fund closed at 24.2 yuan per unit and had a net asset value of 3.79 billion yuan at yesterday's close.

'The A-share ETF came at a bad time as the mainland stock markets hit the lowest in six months on Monday,' said Ben Kwong Man-bun, chief operating officer of KGI Asia.

The CSI 300 yesterday rose a modest 0.6 per cent to close at 2,414.20 points yesterday, lagging the Hang Seng Index, which gained 1.8 per cent to 19,455.30.

'Many mainland companies have issued profit warnings in the past two weeks after being hard hit by the euro-zone crisis and the mainland economic slowdown. Mainland investors and Hong Kong investors are reluctant to buy into the A-share market now,' Kwong said.

But he said the introduction of A-share ETFs in Hong Kong would widen the choice for investors. Kwong said part of the problem was the CAM A-share ETF was traded in yuan, but many local investors do not have yuan on hand. Individuals in Hong Kong can exchange up to 20,000 yuan a day. To solve the problem, Hong Kong Exchanges and Clearing said that from August it would allow investors to use a facility under which brokers and banks would arrange a pool of yuan funds for Hong Kong investors to trade the A-share ETF or other yuan shares.

Securities and Futures Commission deputy chief executive Alexa Lam last week said the A-share ETF launch was a milestone for the city and the SFC was in the process of approving another three A-share ETFs, each of about five billion yuan.

CAM and three other A-share ETFs are among the first batch of yuan ETFs that can invest in mainland stocks using the yuan. The 24 other A-share ETFs currently listed on the stock exchange use derivatives to replicate the indices and are traded in Hong Kong dollars.

The A-share ETF scheme is part of Beijing's broader efforts to internationalise its currency to encourage investors to use yuan. It is also an effort to get more overseas investors into the mainland market, which has been among the worst performers worldwide in the past couple of years.

The mainland has yet to open up its capital market fully and allows some overseas investors in via its two qualified foreign institutional investor (QFII) schemes. The A-share ETF is under the yuan-denominated QFII which has a 70 billion yuan quota.