UOB Asset Management launches Singapore-China feeder ETF
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UOB Asset Management has teamed up with its Chinese joint venture partner Ping An Fund Management to roll out the first master-feeder exchange traded fund operating between the Singapore and Shenzhen stock exchanges.
The launch comes amid persistent volatility and plunging valuations in the China A-shares market this year, as a result of China’s strict zero-Covid policy and regulatory clampdowns in technology, property and other sectors.
The Singapore-listed UOBAM Ping An ChiNext ETF feeds into the Ping An ChiNext ETF, a Shenzhen-listed ETF that tracks the Shenzhen Stock Exchange’s Nasdaq-style ChiNext index, a compilation of the top 100 largest and most liquid A-shares on the tech-heavy bourse that is usually restricted to mainland Chinese and foreign professional and institutional investors.
There has been no announcement of any corresponding UOBAM ETFs being made available via the Shenzhen bourse.
The ETF’s initial public offering will last from October 21 to November 7 and the fund will list on the Singapore Exchange on November 14.
The ETF scheme linking Singapore and Shenzhen was announced last December after the two exchanges signed a memorandum of understanding to develop a link that would allow investors in Singapore and China to access feeder ETFs that link to locally listed ETFs on each other’s exchanges.
The initial scope of available products under the scheme is focused on equities ETFs because of the larger trading turnover, rather than the fixed-income and real estate investment trust ETFs that account for many of the largest ETFs in Singapore.
Thio Boon Kiat, Singapore-based group chief executive of UOBAM, said the ETF marked a “milestone” in its partnership with China-based joint venture Ping An FM, in which it has a 17.51 per cent stake.
Last May, two of UOBAM’s China-focused funds sold in the city-state crossed the S$1bn ($703mn) threshold in combined assets, which the Singapore manager credited to its partnership with the joint venture.
The new ETF aims to provide investors with access to high-growth sectors in China such as biotechnology and clean energy.
The Singapore manager has touted the long-term growth potential of the China market, citing the Chinese government’s efforts to develop “new engines of economic growth” across biotechnology, electric vehicles and robotics.
Around 40 per cent of its holdings will be in industrials, 22 per cent in healthcare, 14 per cent in information technology and 8 per cent in finance, according to a company statement.
Top holdings include lithium-ion battery manufacturer Contemporary Amperex Technology, financial and stock information provider East Money Information Company, and medical instruments manufacturer Shenzhen Mindray Bio-Medical Electronics.
But Paul Ho, senior director of Asia-Pacific equities at UOBAM, admits that the slowdown of the Chinese economy “continues to worry investors”.
“China’s economy has also taken a beating from its zero-Covid policy and the US-China geopolitical and trade tensions look set to compound these problems,” he said.
However, Ho argued that China’s stock market was now “attractively valued” and he expected the Chinese government would soon implement policies that would support the economy such as relaxing the zero-Covid measures.
“These could be the catalysts needed to boost the interest and confidence of Singapore investors,” he added.
The fund is the sixth Singapore-listed ETF to provide access to the China market and follows the launch of the NikkoAM-StraitsTrading MSCI China Electric Vehicles and Future Mobility ETF in January this year and the Lion-OCBC Securities China Leaders ETF last August.
ETF assets have grown rapidly in Singapore over the past two years, surging by 57 per cent in 2020 and then another 47 per cent in 2021 to hit S$12.55bn on the back of increasing retail adoption.
The Singapore Exchange has been active in building out the local ETF space as well, with the local bourse announcing a collaboration with the New York Stock Exchange in July that includes the development of new ETF products.
*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignitesasia.com.