ICBC Credit Suisse Asset Management (International) has become the first fund house to license the new S&P China 500 Index, in a move aimed at expanding its client base.
The firm, the Hong Kong subsidiary of Beijing-based ICBC Credit Suisse AM, is expected to use the benchmark as the basis for exchange-traded and index funds and to start launching these products next year. The fund house did not respond to a request for an interview.
Acknowledging the current negative sentiment on China, Michael Orzano, director of global equity indices at S&P Dow Jones Indices (SPDJI), said that will change in time. “There’s no reason to wait until everyone is clamouring to invest to launch,” he added.
Asset managers are often given a period of exclusive use of an index once they have licensed it, but Orzano declined to comment on whether that was the case under this deal.
SPDJI launched the index on August 28, making it the latest addition to a plethora of China indices seeking to establish themselves as the benchmark for international investors accessing mainland stocks.
But the S&P China 500 seeks to provide more diversification than its peers. While most indices focus on a single equity class, such as China-listed A-shares, Hong Kong-listed H-shares or New York-listed N-shares, the new S&P benchmark includes all share classes of Chinese companies, onshore and offshore.
A further point of differentiation is that financial stocks account for only 26.5% of the S&P China 500. For the CSI 300, Hang Seng Index and FTSE A50, the proportions are 33.8%, 66.97% and 64.9%, respectively.
The lower weighting to financials is a consequence of including all share classes, which tend to have different sector focuses. New York-listed N-shares are more technology-heavy, for example.
Most widely used China indices have a substantial skew to financials, but investors are interested in reducing this concentration, said Orzano.
The top three constituents of the S&P China 500 are web portal provider Tencent, telecoms firm China Mobile and China Construction Bank. The top three constituents of the FTSE A50 and CSI 300 are Ping An Insurance Group, China Merchants Bank and China Minsheng Banking, while for the Hang Seng H-share Index they are China Construction Bank, Bank of China and ICBC.
SPDJI envisages the S&P China 500 becoming a major global index, which is why it is calculating it in five currencies – euro, US dollar, renminbi, Hong Kong dollar and Singapore dollar – from the start. It is unusual to provide data feeds in five different currencies at the launch of a new index, Orzano noted.
Meanwhile, ICBC Credit Suisse AM (International) has indicated its ambition to build its business with recent hires. Elvin Yu arrived this month from Allianz Global Investors to look after all sales, marketing and client relationships outside of China. In July, Ricky Chau joined as director of global investment solutions from Manulife Asset Management Asia, where he was director of asset allocation.