UBS and Barclays buck trend with substantial China ETF bets

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Barclays Bank and UBS have been named among the biggest investors in two newly launched exchange traded funds in China, at a time when many foreign investors continue to shun Chinese stocks.

China Asset Management, one of the country’s largest public fund houses, announced on October 11 that its new ChinaAMC CSI Hong Kong Connect Mainland Financials ETF listed on the Shanghai Stock Exchange after raising Rmb209mn ($28.6mn) in initial assets.

Swiss lender UBS injected Rmb20mn into the fund upon its formal establishment late last month, regulatory filings show, making it the second-largest investor in the fund.

UK banking giant Barclays subscribed to Rmb10mn worth of shares for the initial public offering, becoming the joint third-largest investor alongside the ETF’s issuer ChinaAMC.

This article was previously published by Ignites Asia, a title owned by the FT Group.

The London-headquartered bank also invested Rmb10mn in the Bosera SSE STAR Market 100 ETF, which listed on September 15.

It is the 10th-largest first-round investor in the ETF, which pulled in Rmb2.6bn in the largest ETF IPO this year amid growing investor demand for tech-focused ETFs buoyed by an artificial intelligence boom.

The Bosera ETF is one of China’s first four ETFs tracking the tech-heavy STAR Market 100 Index. The four funds, which also include vehicles issued by Penghua Fund Management, Yinhua Fund Management and Guotai Asset Management, raised a collective Rmb6.9bn.

Some portfolio managers in China believe that the injections show Chinese assets are still attractive to global institutional investors despite a slowdown in China’s economic recovery and the flattening of local equities for much of this year.

Local media reports suggest that the proportion of overseas investors in the onshore China A-shares market is still low.

“The appearance of foreign institutions in the newly issued ETFs has, to a certain extent, reflected the relative optimism of foreign institutions towards the A-shares market as well as the recognition of its medium to long-term investment value,” analysts at Harvest Fund Management noted.

The investments by the two global lenders came as foreign investors dumped a record $12bn worth of Chinese equities in August as Beijing’s latest stimulus measures failed to allay investors’ concerns over spluttering growth in the country and its persisting property sector crisis.

In the first three weeks of September, foreign investors sold a further $3.15bn of Chinese equities even as economic data improved marginally in the year to August.

Early last week, equities-focused ETFs in the Chinese market bled Rmb3.2bn in net flows after the week-long National Day holiday as several broad-market indices posted a pullback, encouraging Chinese investors to take profits.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.