The Vanguard Total China Index ETF is expected to be listed on 10 May, according to a Hong Kong Stock Exchange (HKSE) filing.
The launch comes at a time when a number of China-focused ETFs, particularly those that invest solely in China A-shares, have been delisted as they failed to accumulate satisfactory assets.
Industry sources point to the lack of diversification in these products, with most of them tracking the same index.
In Hong Kong, there are 40 ETFs that invest in Chinese companies, according to the HKSE. Twenty-nine of them invest in mainland-listed companies, nine in Hong Kong-companies and two in companies listed in both jurisdictions.
Our sister publication Fund Selector Asia sought additional information from Vanguard, but it would not comment on differentiation from the other products already available in the market.
The company stated that additional information will be provided at the launch.
A “total China” approach?
However, some information has already been made available on the firm’s website.
The ETF will take a “total China investing approach”, aiming to track the performance of the FTSE Total China Connect Index, which covers 1,000 large- and mid-cap Chinese stocks in all major share classes listed in or outside of China.
FTSE Total China Connect Index
Source: Vanguard
“Over the past 10 years, there has not been a consistent top performer in China’s equity market. Having a diversified portfolio with access to all major Chinese share classes should help minimise return cyclicality,” the firm said.
Source: Vanguard
Vanguard also said that the index the ETF will follow is diversified across industry sectors.
Unlike some China indices, the FTSE Total China Connect Index is not highly concentrated in financials. For example, the CSI 300 Index, a widely used index for China A-shares, has 39.2% exposure in financial companies, according to its factsheet.
FTSE Total China Connect Index sector breakdown
Source: Vanguard
The China ETF will be the sixth passive product Vanguard has in Hong Kong. The other five ETFs collectively have HK$1.2bn (£113m, $150m, €129m) in assets, according to data from the HKSE.
Globally, the firm reports that it manages $1trn in ETFs assets.
