Burned by the 2015/16 market crash, retail investors are shunning individual stocks, and switching to index-trackers.
“They’re avoiding the risks of individual stocks, tha88 instead turning to index investment,” said Xu, whose ChiNext 50 ETF 159949.SZ has seen a 27-fold surge in assets since end-2017 to about 6 billion yuan. Xu also manages Hua An’s flagship SSE180 ETF 510180.SS and Asia’s biggest gold ETF 518880.SS.
Equity exchange-traded funds (ETFs) – the dominant form of index funds in China – have nearly tripled since the start of 2017, exceeding 500 billion yuan ($71.44 billion), according to fund consultancy Z-Ben Advisors. That contrasts with a 7% contraction in active equity and balanced funds during the period.
Although index funds in China have seen their share of the country’s mutual fund industry rise to 11.7% from less than 9% two years ago, the growth potential remains huge. In the United States, index funds have grabbed half of the fund market.
Fearful of missing out an expected boom, Chinese asset managers are rushing to launch new ETFs. Global players including Vanguard and BlackRock are also eyeing this segment of the China market.
Xu said that fiercer competition will inevitably lead to price wars, and innovations.
Having already launched ETFs tracking German and Japanese indexes to faciliate offshore investment, Hua An plans to launch an ETF that invests in the French market, Xu said.
“China is accelerating its opening-up. That creates new growth opportunities for ETFs.”
($1 = 6.9988 Chinese yuan renminbi)
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