S&P Dow Jones Indices (S&P DJI) second index featuring Shanghai-Hong Kong Stock Connect, the S&P Access China A Dividend Opportunities Index, is attracting exchange-traded-funds (ETFs) providers, according to the index provider.
The index tracks the performance of high-yielding common stocks traded on the Shanghai Stock Exchange that are within the scope of Shanghai-Hong Kong Stock Connect and follows the creation of its S&P Access China A Index in February. “The A-share index we have launched in February is based on the market cap of shares permitted under the stock connect scheme and is more related to share prices, while this new index is a high-dividend version, covering 75 shares that generate high dividends from the existing A-shares,” said an S&P DJI official.
The stock connect theme for new indices targeting the growing demand for A-share exposure first attracted Hang Seng Indexes and China Securities Index, which released the Hang Seng CSI Shanghai-Hong Kong AH Smart Index, to capture the performance of 50 dual listed company eligible under the stock connect and provide a benchmark reflecting a price arbitrage strategy that may bring additional returns to investors. Further, China Exchanges Services launched a new index series on the Shanghai-Hong Kong Stock Connect programme to capitalise on the initial demand from Mainland asset managers looking to market ETFs based on the exchanges new stock connect benchmarks last December.
And now China Southern Asset Management (CSAM), the parent company of CSOP Asset Management, and China Asset Management are set to launch the first mainland ETFs under the Shanghai-Hong Kong Stock Connect programme for lower cost and real time trading. A CSAM spokesperson said that they will also invest via the Qualified Domestic Institutional Investor (QDII) scheme if the daily quota of the stock connect is used.
Industrials, consumer discretionary, financials and utilities account for 85.6% of the shares, and the new S&P DJI index is part of the provider’s dividend opportunities series. “As the index chases the performance of A-shares via stock connect with the northbound (Hong Kong to Shanghai) daily trading quota of CNY13bn (US$2.09bn), there is a possibility that the daily quota might be used up on any trading day,” said the official. “Although there will be a minor impact on the index itself as there is no physical trading involved, but the influence might be bigger for products like ETFs that featured the new index and product providers will need to inform investors themselves with the risk exposure.”
The launch of the new index supports easy access to China’s equity market and a way for Chinese investors to reach beyond their home market, according to Tianyin Cheng, associate director of strategy indices at S&P DJI.
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