New Hong Kong ETF will track the 35 largest companies with least exposure to China risk

French asset manager Amundi says the ETF allows diversification away from mainland companies

PUBLISHED : Tuesday, 12 April, 2016, 7:25pm
UPDATED : Tuesday, 12 April, 2016, 9:26pm

French asset manager Amundi launched an exchange-traded fund (ETF) in Hong Kong on Tuesday, featuring low correlation to the mainland market.

The Amundi Hang Seng HK 35 Index ETF is the first ETF product introduced by Amundi to the Hong Kong market, and is also the first ETF to track the Hang Seng HK 35 Index.

Xiaofeng Zhong, chief executive north Asia of Amundi, said the companies tracked by the ETF have more than 50 per cent of revenue derived from areas outside mainland China, compared with the Hang Seng Index which sees more than half of its constituents under mainland Chinese names.

Compiled by Hang Seng Indexes, the index tracks the 35 largest and most liquid Hong Kong companies. The index returned negative 17.89 per cent in the prior year, and negative 10.12 per cent decline year to date, according to a February term sheet for Hang Seng HK 35.

Individual companies in the index are capped at a 10 per cent weighting. Hang Seng Indexes launched the index in January 2003, but provided backdated tracking data to January 2000.

The three companies making up the largest weighting in the index are CK Hutchison Holdings, AIA and HSBC Holdings.

Matthieu Guignard, head of product development of Amundi, said the growing number and specialisation of local ETFs were of benefit to investors.

“The HSI ETF products are more popular among retail investors, while institutional investors tend to have a better understanding of the difference our products provide,” he said.

The product is likely to appeal to investors who want to avoid direct equity exposure to the cooling mainland economy, even as Guignard sought to distance himself from any particular outlook on China’s growth prospects.

“We did not start this product for a momentum consideration, but we just took the chance to be the first one to track the Hang Seng HK 35 Index,” said Guignard.

Statistics provided by Amundi shows passive management of assets had becoming more popular in the past few years.

Global assets under management by ETF and other passive products rose to US$11 trillion by 2014, up from US$ 3 trillion in 2003. The proportion of global assets under management by ETFs rose to 14 per cent from 8 per cent in the process.

Tuesday’s debut brings the number of ETF products linked to Hang Seng Indexes to 41 – with listings on 18 different stock exchanges across the world.

About US$24 billion is tied up with ETFs linked to Hang Seng Indexes.