Yuan ETFs win investors' favour with transparency, simplicity and low cost
Yuan-denominated exchange-traded funds (ETFs), which were launched in July, have caught investors' attention since regulatory changes opened the way for cross-border investment, say fund managers.
"Yuan ETFs are transparent, simple and have a low transaction cost," said Eugene Lee, managing director of EFund Management, which sold out a 2 billion yuan (HK$2.45 billion) ETF it launched in August that tracks the performance of the CSI 100 Index.
While yuan-denominated funds had fallen somewhat out of favour among investors, yuan ETFs had proved popular, said Lee. "Since the regulatory changes, Hong Kong investors can now buy into the mainland market in a very low-cost way."
In June, Beijing approved the creation of long-awaited yuan ETFs to allow investors on the mainland and in Hong Kong to invest in each other's markets. Two such funds were launched on the mainland in July for people there to invest in products that track Hong Kong's indices.
Hong Kong's Securities and Futures Commission (SFC) also approved the creation of yuan-denominated ETFs, and the mainland granted quotas of 70 billion yuan to 21 fund managers in the city to launch the so-called R-QFII funds. Under the scheme, those fund managers, which were subsidiaries of mainland securities firms, could sell yuan-denominated funds to retail investors.
But they did not prove popular because most of the managers were little known in Hong Kong and they were restricted to investing 80 per cent of their portfolios in mainland bonds and 20 per cent in mainland stocks.
Haitong International Securities' executive director and chief operating officer Patrick Poon said his firm would consider issuing a yuan ETF once the mainland gave the approval.
Fund managers that wish to launch a yuan ETF in Hong Kong are required to apply for a quota from Beijing and seek approval from the SFC in Hong Kong.
The SFC has so far approved two yuan ETFs in Hong Kong - the China AMC CSI 300 Index ETF launched by China Asset Management in July and the EFund CSI 100 A-share Index ETF by EFund.
Haitong is considering making an application to Beijing and the SFC. "There has been a worldwide trend towards ETFs. Yuan ETFs offer Hong Kong investors an easy way to invest in the mainland stock market," Poon said.