Since the introduction of the first stock Exchange-Traded Fund (ETF) in 2005, the landscape of investment tools in the Chinese market has dramatically transformedIn a remarkable display of growth, the total assets of stock ETFs soared from zero to one trillion yuan over an 18-year periodHowever, this pace quickened significantly, with the total reaching two trillion yuan in just two years following that milestoneThis surge occurred during a challenging period for the A-share market, illustrating a robust appetite for equity investments among Chinese investors.
In this evolving financial landscape, the successful fundraising of ten different China Securities A500 ETFs stands as a testament to the growing acceptance and popularity of the ETF investment model within the marketThrough innovative structures and strategic planning, these ETFs have captured significant investor interest, solidifying their presence in the investment community.
According to recent data from Eastmoney Choice, by September 23, there were 316 different stock ETFs available in the market that track 316 unique indices
Remarkably, 16 of these ETFs were newly introduced in 2024, collectively raising over 43.8 billion yuan in their initial funding roundsNotably, the China Securities A50 ETF and the China Securities A500 ETF accounted for a substantial 365 billion yuan of this total, making up an impressive 83.33% share of the newly generated funds.
Simultaneously, the scope of cross-border ETF offerings is also broadeningSince the beginning of 2024, eight new types of cross-border ETFs have been introduced, attracting a total of 6.5 billion yuan in initial fundraisingAmong these, funds tracking indices such as the New State-owned Enterprises Dividend Index and the FTSE Arabian Index have demonstrated particularly strong investor demand, raising 3.4 billion yuan and 1.2 billion yuan, respectively.
The proliferation of these new ETFs can be attributed not only to favorable regulatory guidance but also to the proactive efforts of index providers and public fund institutions seizing market opportunities
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This collaborative environment has fostered a fertile ground for innovative financial products, making ETFs a cornerstone of modern investment strategies.
Notably, the influx of long-term capital into the market has propelled the total assets in stock ETFs to surpass the two-trillion yuan benchmarkHistorical data indicates that since the inception of the first stock ETF in 2005, it took 18 years to reach one trillion yuan, yet only two years to double that amount against the backdrop of a complicated A-share market.
As noted by industry expert Wu Qing, as of August 2024, institutional investors including public equity funds, insurance companies, and various pension funds held nearly 15 trillion yuan of the circulating market capitalization of A-shares, more than doubling their stake since early 2019 and increasing their share from 17% to 22.2% of the market.
The ongoing popularity of the A500 ETF is part of a larger trend indicating robust development within the ETF sphere over the past two years
According to announcements from the China Securities Regulatory Commission, on September 5, multiple public fund institutions, including prominent names like FT Fund, Harvest Fund, Huatai-PB, Morgan Stanley, and Yinhuafund, submitted applications for this productRemarkably, these applications were all simultaneously approved the next day, with the public offering officially launched on September 10.
Notably, although the China Securities Index Company released the compilation plan and constituent stock list for the China Securities A500 Index on August 27, the formal announcement of this index came later on September 23. This timing indicates that the A500 ETF was launched ahead of the official index release, yet this did not dampen investor enthusiasm for the product.
The announcements by various public fund companies reveal that six products were able to close their fundraising activities ahead of schedule, and all ten products reached the fundraising cap of 2 billion yuan
Thus, the total for the ten products reached a substantial 20 billion yuan upon their initial issuance.
The JiaShi China Securities A500 ETF officially established itself on September 20. According to the contract effectiveness announcement, JiaShi Fund invested 200 million yuan of its own funds in the ETF, which accounted for 10% of the total raised during its initial offeringIn alignment with regulatory requirements, public institutions adopting their own capital into their products must maintain this investment for a minimum of six months.
Investors have shown a strong interest in the A500 ETF not only due to the relatively low valuation levels of A-shares but also because of its unique characteristicsAccording to the China Securities Index's official statement, the index weighting methodology promotes an industry-balanced approach, extensively capturing the sectoral characteristics of the A-share market while also incorporating leading companies from emerging sectors to reflect timely changes in industry dynamics
Furthermore, it boasts high coverage, accounting for approximately 56% of the A-share market’s total market capitalization and free-float market capitalization, with a dispersed weight among the top 10 and top 20 constituents, representing 21% and 30.4%, respectively.
The index also integrates ESG (Environmental, Social, and Governance) criteria to facilitate domestic and international long-term investments in A-shares.
As of September 23, data indicates that among the 11 sectors represented in the A500 index, the weightings for industrials, information technology, communication services, and healthcare industries are 22.08%, 13.08%, 5.83%, and 7.73%, respectively, totaling 48.72%. Notably, 337 of the 500 constituent stocks have market capitalizations below 50 billion yuan, with 162 under 20 billion yuan and even 29 falling below 10 billion yuan
This diverse representation highlights the A500 ETF's focus on smaller growth companies that may offer substantial upside potential.
The successful launch of the A500 ETF adds further diversity to the assortment of stock ETFs available in the marketBy September 23, there were a total of 789 stock ETFs with a combined scale of 2.03 trillion yuan, representing a year-to-date growth of 40.44%. Among these, broad-based index ETFs (or scale index ETFs) increased from 847 billion yuan at the beginning of the year to 1.52 trillion yuan, soaring 79.25%.
The available categories of stock ETFs include 316 types, corresponding to 316 indexed products, with 16 newly added in 2024. This includes major players such as the China Securities A500 ETF, the China Securities A50 ETF, and various sector-focused ETFs.
Among the newly introduced ETFs, the largest was the A500 ETF, followed closely by the A50 ETF
Likewise, the A50 ETF saw great success, having established ten products in March 2024 that collectively raised 16.5 billion yuanAs of September 23, the combined asset scale of these ten products has surged to 31.1 billion yuan, marking an 88.48% increase.
The entities responsible for the A50 ETF include prominent fund houses like Yi Fang Da and Industrial and Commercial Bank of China’s Credit FundNotably, the same firms involved in the A50 ETF have also engaged in the A500 ETF's distribution.
The third-largest issuance was the Central State-owned Enterprises Technology Innovation ETF, which tracks an index customized by the China Chengtong Holdings GroupCurrently, this ETF has only one product with a fundraising scale of 1.785 billion yuan, and as of September 23, its net asset value stands at 1.233 billion yuan.
The Central State-owned Enterprises Technology Innovation Index is exclusively designed for the China Chengtong Group, which holds 98.24% of the shares of the Chengtong Securities Co., which in turn controls 60% of the Ruotong Fund.
Among the other 13 newly introduced stock ETFs, most track sector-based or thematic indices, with the exception of the Deep Main Board 50 ETF which follows a broader index
Examples of these include indices focused on state-owned enterprise dividends, automotive parts, oil and gas resources, and high-yield strategiesExcept for the State-owned Enterprise Dividend ETF, which has seen a slight increase, most have experienced varying degrees of asset value shrinkage since their launch.
The array of cross-border ETFs has also expanded significantlyBy September 23, there were 130 cross-border ETFs collectively managing 341.3 billion yuan, reflecting a year-on-year increase of 22.26%. Of these, 39 were established this year, including newly launched products tracking indices such as the Saudi ETF, the Dow Jones ETF, and the Central State-Owned Enterprises Dividend ETF, among others.
In terms of holder demographics, by mid-year, institutional investors accounted for approximately 48.31% of the total share of both stock and cross-border ETFs, a 4.05 percentage point increase from the beginning of the year.
However, precise data regarding the proportion of long-term capital in institutional holdings remains elusive
The Shanghai Stock Exchange’s ETF Investment Trading White Paper suggests that with the continuous evolution of product offerings and the improvement of supporting mechanisms, ETFs have increasingly become a prime asset allocation tool for investors, thus enhancing the involvement of long-term capital and creating a positive market ecosystem.
Competition among institutions offering ETFs has intensified significantlyAccording to data from Eastmoney Choice, as of September 23, 51 public fund institutions had established stock ETFs, a one institution increase from the previous year.
Among the newcomers is Haifutong, which established its first stock ETF, the Haifutong 2000 ETF, in March 2024. This was followed by the launch of an automotive parts ETF in AprilAs of September 23, the total net asset value of these two ETFs has reached 74 million yuan.
Although their scale may be modest, they significantly enrich the ETF options offered by Haifutong, marking the institution as the 23rd firm to venture into both stock and cross-border ETF offerings
Before this expansion, their only previous ETF was the Haifutong Hong Kong Stock Connect Technology ETF, which had a net asset value of 67.3 million yuan by September 23. Combining both their stock and cross-border ETFs, Haifutong now manages a total of 747 million yuan in assets.
Wanjia Fund also added a cross-border ETF to its portfolio in August, marking the establishment of its first product in this category, the Wanjia Hong Kong Stock Central State-owned Enterprises Dividend ETFAs of September 23, this product had net assets valued at 22.2 million yuanWhen combined with the stock ETFs, Wanjia’s total asset scale now reaches 539.8 million yuan.
According to data from Choice, three public fund institutions leading in growth concerning the two categories of equity ETFs in 2024 are Yi Fang Da, Huatai-PB, and Hua Xia Fund, each with impressive increments of 184.6 billion yuan, 160.5 billion yuan, and 115.1 billion yuan respectively, showcasing growth rates of 72.67%, 82.28%, and 28.84%.