According to the 27-page report, which builds on earlier work by the group, the China equity ETF market comprises some 100 funds listed on exchanges outside of China, with combined assets under management (AUM) of about $28bn (€21bn). Hong Kong accounts for more than half of global AUM.
Areas covered by the guide include: the recently-announced expansion of the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme, which is likely to encourage more physical A-share ETF launches outside Hong Kong; an analysis of correlations between China equity indices and other global benchmarks; and an ETF strategy to exploit price differences between A-shares and H-shares.
“In recent years, the Chinese government has become increasingly keen to open its local securities market to the rest of the world,” wrote Ben Johnson, the director of global passive fund research at Morningstar.
“The growing crop of RQFII ETFs provides access to offshore investors looking for exposure to the local A-Share market, and these funds have successfully gathered assets. The expansion of the RQFII programme and the success of RQFII ETFs have created the need for more investor education on these topics.”
A PDF of Morningstar’s Guide to Investing in Chinese Equities via ETFs can be downloaded from the Morningstar website, here.