Asia ETF Roundup (Industry) – June 2016

MSCI Delays China A-Shares Inclusion to EM Index
On 14 June 2016, MSCI announced that it will delay the reclassification of China A-Shares into the Emerging Markets. MSCI cited that (1) investors generally stressed the need for a period of observation to assess the effectiveness of the QFII quota allocation and capital mobility policy changes as well as the effectiveness of the new trading suspension policies; (2) the 20% monthly repatriation limit remains a significant hurdle for investors that may be faced with redemptions such as mutual funds and must be satisfactorily addressed; and (3) the local exchanges’ pre-approval restrictions on launching financial products remain unaddressed.

Despite the delay, MSCI did not rule out a potential off-cycle announcement should further significant positive developments occur ahead of June 2017.

Along with the announcement of A-Shares’ non-inclusion, MSCI also announced the following:

• MSCI Pakistan Index will be reclassified to Emerging Markets status (effective May 2017).
• MSCI Peru Index will remain in the MSCI Emerging Markets Index. This is subject to maintaining the minimum requirement for Emerging Markets that the index contains at least three constituents.
• MSCI Argentina Index will be included in its 2017 Annual Market Classification Review for a potential reclassification to Emerging Markets.
• MSCI Korea Index will not be included in its 2017 Annual Market Classification Review for a potential reclassification to Developed Markets.
• MSCI Nigeria Index may be removed from the MSCI Frontier Markets Index and reclassified as a stand-alone market due to capital mobility issues.

India’s EPFO to Decide on Potential Increase in ETF Investments
According to India’s Economic Times, on 7 July 2016, India’s retirement fund body Employees’ Provident Fund Organisation (EPFO) will make a decision on increasing in investments in ETFs. The EPFO had started investing in ETFs last August by investing 5% of its investible deposits in ETFs.

Taiwan Stock Exchange and Bursa Malaysia Sign MOU on ETF
On 28 June 2016, the Taiwan Stock Exchange and the Bursa Malaysia signed a second Memorandum of Understanding (MOU) to “undertake a joint study to explore capital market opportunities to expand various areas of potential cross-border cooperation, namely in exchange traded funds (“ETFs”), indices, market connectivity, and market promotional activities”. The two parties signed their first MOU in 1999 on cooperation and exchange.  

Thailand Signs on Asia Region Funds Passport (ARFP)
Recall that on 28 April 2016, Australia, Japan, Korea and New Zealand signed the Memorandum of Cooperation (MOC) on the Asia Region Funds Passport (ARFP), an international initiative that facilitates the cross-border offering of eligible collective investment schemes (CIS) subject to the Passport arrangements. According to Ignites Asia, Thailand signed on the MOC after the cabinet gave approval on 14 June. As we commented previously, we would like to see more countries participate in these fund passport schemes to help strengthen and improve the operational environment with the aim of further developing the Asia ETF market.

RQFII ETF Watch – Net Inflows in June Totaling Rmb 4.5 billion

• In June, RQFII ETFs recorded estimated net inflows of Rmb 4.5 billion (14.5% of beginning and 12.7% of ending AUM). This compares to Rmb 0.2 billion of estimated net inflows in May. For the first half of the year, total net inflows are estimated at Rmb 6.9 billion.
• The majority of the net inflows during the month went to the CSOP FTSE China A50 ETF (82822 & 02822), estimated at Rmb 2.7 billion, where most of the inflows were skewed towards the first half of the month, before MSCI’s announcement of delay in A-Shares inclusion into the Emerging Markets. The CSOP China 5-Year Treasury Bond ETF (83199 & 03199) also saw net inflows estimated at Rmb 1.3 billion.
• The largest A-Share ETF by AUM in Hong Kong, iShares FTSE A50 China Index ETF (02823) continued to record net outflows in June, estimated at Rmb 0.3 billion. This compares to estimated net outflows of Rmb 0.7 billion in May. For the first half of the year, total net outflows from the iShares FTSE A50 China Index ETF are estimated at Rmb 5.7 billion.

New Launches and Listings

Bangkok Capital Lists an ETFs in Thailand
On 7 June 2016, Bangkok Capital Asset Management listed an ETF on the Stock Exchange of Thailand, namely BCAP MSCI Thailand ETF (BMSCITH). The ETF tracks the MSCI Thailand ex Foreign Board Index which is designed to measure the performance of the large and mid cap segments of the Thailand equity market. All securities with alternate listing code 'FGN' are excluded from the index. The index has 29 constituents covering about 85% of the Thailand equity universe.

It has been over two years since a new ETF was listed on the Stock Exchange of Thailand. The listing of this ETF puts the total number of ETFs in Thailand at 17.

Yuanta Lists 2 ETFs in Taiwan
On 15 June 2016, Yuanta Securities Investment Trust listed two ETFs on the Taiwan Stock Exchange, namely the Yuanta EURO STOXX 50 ETF (00660) and the Yuanta Nikkei 225 ETF (00661). The ETFs track the EURO STOXX 50 Index and the Nikkei 225 Index, respectively.

Fubon Lists an ETF in Taiwan
On 17 June 2016, Fubon Asset Management listed an ETF on the Taiwan Stock Exchange, namely the Fubon Nasdaq-100 ETF (00662). The ETF tracks the NASDAQ-100 INDEX.

The listing of this ETF and the Yuanta ETFs puts the total number of ETFs in Taiwan at 49.

Mirae Lists an Oil Futures ETF in Hong Kong
On 16 June 2016, Mirae Asset listed an oil futures ETF on the Stock Exchange of Hong Kong, namely the Mirae Asset Horizons S&P Crude Oil Futures Enhanced ER ETF (03097). The ETF tracks the S&P GSCI Crude Oil Enhanced Index Excess Return, which tracks the price of the WTI Futures Contracts.

iShares Lists 6 ETFs in Hong Kong
On 29 June 2016, iShares listed 6 ETFs on the Stock Exchange of Hong Kong. The ETFs track the NASDAQ 100 Index, the FTSE 100 Index, the MSCI Taiwan Index, the DAX Index, the EURO STOXX 50 Index, and the KOSPI 200 Net Total Return USD Index, respectively. All these ETFs are available in three trading counters in three currencies (Hong Kong dollar, Renminbi and U.S. dollars). According to the ETF’s prospectuses, the on-going charges are estimated at 21-35bps.

The listing of these ETFs and the Mirae ETF put the total number of ETFs in Hong Kong at 183 (141 ETFs and 42 dual/multiple counters).

Mirae Lists an ETF in Korea
On 16 June 2016, Mirae Asset listed an ETF on the Korea Exchange, namely the TIGER China H-Share ETF (A245360). The ETF tracks the Hang Seng China Enterprise Index.

Samsung Lists 3 Strategic-Beta ETFs in Korea
On 24 June 2016, Samsung Asset Management listed 3 strategic-beta ETFs on the Korea Exchange. The ETFs track the FnGuide Value Strategy Index, the FnGuide Growth Strategy Index and the FnGuide Turnaround Strategy Index, respectively.

The listings of these ETF and the TIGER ETFs put the total number of ETFs in Korea at 215.

List of ETFs Launched in June 2016