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Asset Management / Wealth Management
ETF surge raises hopes for China market recovery
A50 and gold feeder funds propel country's ETF market to exceed 2 trillion yuan
Janette Chen 15 Apr 2024

China, the largest exchange-traded fund (ETF) market in Asia, has seen a surge in passive investment vehicles amid the recent market downturns, propelling its ETF market to surpass 2 trillion yuan (US$280 billion) in March 2024.

Globally, ETFs have maintained an impressive growth trajectory this year, recording US$144.94 billion in net inflows in March. Mutual fund managers are generally bullish on the prospects of the mutual fund and ETF markets for the remainder of the year.

In China, an astonishing 69 new mutual funds entered the fundraising process in the second week of April, with equity funds accounting for nearly 80%. Among them were 28 ETF funds and 24 ETF feeder funds.

According to mutual fund managers, the surge in ETF feeder fund issuance reflects the intensifying competition in the ETF market, which has spilled over into the over-the-counter arena.

Several CSI (China Securities Index) A50 ETF feeder funds have gained significant attention, with multiple fund houses launching products tracking the index.

Following the approvals of Ping An Fund and J.P. Morgan Asset Management's CSI A50 ETF feeder funds in late March, a number of other fund houses also received the green light to issue similar products. By early April, one of the first batch of CSI A50 ETF feeder funds has completed its fundraising, with six more products in the pipeline.

So far, more than 30 ETFs and ETF feeder funds have been launched since the beginning of the year, reflecting the growing appetite for ETF investments. In addition to the intensifying competition in the A50 ETF arena, new ETF products have emerged. These include dividend ETFs, gold ETFs, and thematic ETFs in sectors such as information technology and new energy, providing more attractive options for investors and further diversifying the market

All that glitters

Gold ETFs, in particular, have witnessed a surge in popularity despite encountering price volatility from time to time. Following the recent rally in gold prices, investors have flooded into these products, with several funds reporting record highs in assets under management (AUM).

Huaan Gold ETF has surpassed 21.2 billion yuan in AUM as of April 12, making it the largest gold ETF in China and the first to exceed the 20 billion yuan AUM mark. The fund has been attracting 4.2 billion yuan of net inflows since March, up 18% year-on-year.

Other gold ETFs from such fund houses as Bosera, E Fund, and Guotai have also hit record highs, attracting net inflows of 2.1 billion yuan, 2.3 billion yuan, and 1.4 billion yuan respectively since March.

The total inflow of gold ETFs and ETFs investing in gold-related stocks has exceeded 12 billion yuan from March to the second week of April, underscoring the robust demand for such products.

Upbeat sentiment

There is a sense of recovery in the overall fund management sector in China, with the equity market warming up again and investors’ continued interest in fixed-income products, according to several fund managers. Over 110 new funds are either in the process of launching or waiting in the pipeline.

This is a promising development against the backdrop of a slowdown in the launching of new funds in the past two years. Fund launches reached their peak in 2021 and 2022, with total AUM of new funds exceeding 3 trillion yuan. Since 2022, however, the trend has reversed, with total AUM of new funds shrinking to less than 1.5 trillion yuan.

With investor confidence recovering, mutual fund managers are bullish on the prospects of the market for the remainder of the year, despite the market corrections that have happened recently.

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Philippe Tassin
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