Ping An of China Asset Management has launched three ETFs targeting retail and institutional investors in Hong Kong and overseas, adding H-share exposure to its existing A-share offering.
The new products, which form part of the Ping An China/HK ETF Series, are the HK Dividend ETF, the HK Mid Cap Select ETF and RAFI HK50 ETF. All are physically backed, compared with the firm’s A-Share 50 ETF, a synthetic fund launched in 2010.
Company chairman Timothy Chan notes that the ETF market in Hong Kong is largely retail, adding: “In the next one to two years, the biggest challenge to our ETF business is whether we can bring in international institutional investors.”
The firm’s stable of four ETFs form a core-satellite strategy: the RAFI HK50 ETF and A-Share 50 ETF are core products suitable for investors looking for stable long-term growth, while the HK Dividend ETF and HK Mid Cap Select ETF are satellite defensive and high-beta strategies.
“In order to capture the potential in the ETF market, we need to develop a series of products to meet different investment needs,” notes Chan.
However, he also acknowledges that Ping An is a latecomer to the ETF market and as such needs to try and differentiate its strategy in the face of established international players.
Chan reveals that the company is in the research process for the possible launch of an RMB-denominated ETF as well as ETFs denominated in different currencies and listed on various exchanges.
The firm’s HK Dividend ETF and the HK Mid Cap Select ETF are based on customised indices provided by China Securities Index company and are the first of their kind in Hong Kong.
The constituents of the RAFI HK50 ETF are selected on the grounds of fundamental indicators such as revenues, cashflows, dividends and book value, as opposed to a traditional market-cap approach.
Jacqueline Zhang, Ping An of China AMC’s head of global business development, argues that the three products meet the needs of differing investor risk profiles. “The HK Dividend ETF is a defensive play mainly targeted at relatively conservative investors, while the HK Mid Cap Select ETF’s high-beta profile is attractive to more aggressive investors.”
The low interest rate environment is one of the reasons why the company opted to launch its high-dividend yield ETF product now, confirms Benjamin Rudd, head of overseas investment. “There is a clear demand for products which provide higher yields,” he states. “And the high-yield product is historically more defensive, which has appeal to investors when the markets are still volatile.”