China’s ETF Industry: Short History With Rapid Growth

November 03, 2016

Fixed Income & Commodities

There are currently only four fixed-income funds and four commodity funds listed in China. The Chinese fixed-income market still offers some of the highest yield among major economies. Some Chinese investors have started realizing the benefit of including fixed income as part of their more volatile equity-centric investment portfolios. It is conceivable there may be more room for growth in fixed income.

It is interesting to note that all four commodity products are gold ETFs.

International Exposure

There are very few ETFs providing international exposure outside China. Boresa’s S&P500 ETF was launched in 2013, and it has only attracted $30 million in assets, while Guotai’s QQQ ETF has about $11 million.

Technology & Growth

Technology is playing an increasingly important role in people lives in China. The success of e-commerce is affecting not only how the Chinese shop but how they invest. Today one could acquire financial products with the same ease as one would order a pair of jeans online or on their smartphones.

Alibaba and social media giant Tencent’s WeChat have become important direct distribution outlets to investors. In a span of just nine months, Alibaba has gathered more than $80 billion in Yu’e Bao, a money market fund managed by a third party. The long-standing asset managers also invest heavily in technology.

For example, China AMC recently launched a program selling mutual funds on the most popular social network app—WeChat. With a short history, the Chinese asset managers might be at the forefront of a global trend—redefining investor connectivity by forging relationships with technology giants, reaching investors in a direct way never seen before, propelling the growth of the asset management industry, including that of ETFs.


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