As China reopens its economy after an extended period of Covid-19 restrictions, global investors are considering how best to increase their exposure to the region. Refinitiv Lipper research data shows a positive net inflow into China equity funds of over US$7 billion for the first four months of 2023. Interest is growing, with institutional investors allocating more into China equities. China is targeting 5% growth in GDP, with mobility and economic activities picking up – so what does this mean for investment opportunities?
At a panel session convened at Risk.net’s ETF & Indexing Forum in Hong Kong, experts from FTSE Russell, Citi, BlackRock and CSOP Asset Management discussed the latest investment trends and challenges, and the opportunities afforded by China A-shares. Here we reveal the key insights from the session, moderated by FTSE Russell’s Emerald Yau.
The opinions expressed were reflective of the investment environment at the time of the discussion in May 2023.
China equity for global investors
Re-open, recover,
re-enter
China equity for
global investors
Reopen, recover, re-enter
Learn more about FTSE Russell's China Indices
How has China’s reopening
influenced investor behaviour
and the investment outlook?
“China’s equity market, being the second-largest in the world by total market capitalisation, presents a vast and diverse opportunity for global investors. However, navigating this lucrative investment landscape requires investors to consider various exposures and risk versus reward, as well as determining which market segment best aligns to their portfolio”
Emerald Yau
Head of Equity Index Product Management, Apac, FTSE Russell
How has the A-shares investment landscape evolved?
What opportunities await investors
re-entering China?
What is the newest trend to
access China A-shares?
How has China’s reopening influenced
investor behaviour and the investment outlook?
“We have a flagship China A-shares ETF, with flows today being strong and solid. We see equities outflow mainly from developed markets. Emerging markets [EM] has been an area where flow is coming in. In EM we have a huge exposure in China. Investors have been looking for opportunities into China and EM. Within the space, A-shares have been very resilient.”
“We have a full spectrum of products covering China, including the FTSE China A50 Index. Since the beginning of the year, there is a strong hope of recovery and reopening, which we see from a market and product perspective. There is a strong inflow. In recent months, as the data turns around quickly and patterns change, we have seen a bit of pressure in terms of the A-shares and Hong Kong stock market.”
Yi Wang
Managing Director, Head of Quantitative Investment
CSOP Asset Management
“Clients had been trading quite a lot [at the start of the year], mostly inflow – purchase of ETFs across large cap, mid cap and small cap in the hope of recovery. [This came from] pension funds from Europe and Asia mostly, private banks and smaller asset managers.”
Antoine de Saint Vaulry
Regional Head of ETF Sales and
Business Development, Apac
Citi
Which economic activities will
have the most significant impact
on China’s recovery?
The panel
About FTSE Russell's China Indices
May 2023
Which economic activities will have the most
significant impact on China’s recovery?
“We are not seeing extra global demand so the question is how to [stimulate] local demand … The expectation is for some sort of fiscal stimulus, concentrating on how to support the property sector, convert [the investment] into real cash flow and [bring it] back to the economy again.”
Yi Wang
Managing Director, Head of Quantitative Investment
CSOP Asset Management
“In BlackRock’s point of view, we over-rate China and Asia versus developed markets [due to] the continuous divergency of monetary policies. [Our] expectation of US growth is around 1%; in China the official target is about 5%. We think it can overshoot at 6.1%. We potentially see more support from the government down the road this year.”
Andy Ng
iShares Investment Strategist, Asia-Pacific
BlackRock
How has the A-shares investment landscape evolved?
And what opportunities await investors re-entering China?
“Three themes are playing out in the onshore space. First is the consumer-led reopening story. Over 40% of the [FTSE] A50 exposure is consumer led.
If you look across other major China indices, the [FTSE] A50 is the highest in terms of consumer related exposure.”
Andy Ng
iShares Investment Strategist, Asia-Pacific
BlackRock
What is the newest trend to access
China A-shares?
“China has a very restricted repo market – it is not easily accessible for offshore investors. Short exposure is very precious … The long exposure inventory is the best thing since sliced bread for banks. That leads to massive outperformance payable by ETFs that invest in China using swap exposure...”
Antoine de Saint Vaulry
Regional Head of ETF Sales and
Business Development, Apac
Citi
“Second, we have a lot of client conversations regarding state-owned enterprise (SOE) reform. That’s going to play out with higher quality and profitability. The FTSE A50 has the largest SOE exposure compared to other indices.”
“Last is the China policy agenda on decarbonisation. Over 15% [of the FTSE A50] is related to [this trend]. These are very unique exposures that tie into these three themes.”
“Stock is tough to access and therefore expensive. There are very few broad-based indices with an accessible hedging tool … the only one we have offshore that really works is the SGX FTSE China A50 Futures.”
Emerald Yau
Head of Equity Index Product Management, Apac
FTSE Russell
Antoine de Saint Vaulry
Regional Head of ETF Sales and Business Development, Apac
Citi
Antoine de Saint Vaulry leads the ETFs initiative for Citi in Apac, based in Hong Kong. He began his career in 2001 at Societe Generale on the equity finance desk in Paris, and in 2004 joined the securities finance department of Commerzbank in London. In 2010, de Saint Vaulry relocated to Hong Kong to lead Commerzbank’s Delta 1 and securities financing trading team. Since 2012 he has been in charge of setting up and developing Commerzbank’s Asian ETF market-making platform. De Saint Vaulry joined Citi in September 2018 to build and grow Citi’s ETF market-making capabilities in Apac and globally, as Apac head of ETF trading. He expanded his remit in 2020 to cover sales and business development for the ETF initiative across Citi’s different businesses. With a wealth of knowledge and expertise in equity products, de Saint Vaulry is a frequent contributor to the ETF world, speaking at conferences, roundtables and workshops, and being quoted in articles around Asia. He received an MSc in management from ESSEC Business School in France in 2001.
Yi Wang
Managing Director, Head of Quantitative Investment
CSOP Asset Management
Yi Wang is the Managing Director and Head of Quantitative Investment at CSOP Asset Management. He oversees all ETF product investment activities including equity ETFs, leveraged and inverse exchange-traded products, money-market fund ETFs and fixed income ETFs. Wang also oversees the active fixed income portfolio management. He is the voting member within the CSOP investment committee and deputy chairman of the CSOP responsible investment committee. Prior to joining CSOP, Wang was at Redington, based in London, focusing on UK and EU pension/insurance investment solutions. He graduated from University College London with a major in mathematics, and Cass Business School with a Master’s degree in actuarial science.
Andy Ng
iShares Investment Strategist, Asia-Pacific
BlackRock
Andy Ng is an iShares Investment Strategist in BlackRock's ETF and index investments Apac team, based in Hong Kong, where he is responsible for delivering trade ideas and actionable market insights across asset classes to clients using iShares products. Prior to joining BlackRock, he worked at Vanguard as an investment product specialist, providing investment strategy and product recommendations to clients and sales teams. Prior to Vanguard, Ng was
a portfolio manager at JP Morgan Asset Management Multi Asset Solutions. He managed
multi-asset portfolios for Asia's institutional clients and Hong Kong Mutual Funds, responsible for fund selection, portfolio construction and tactical asset allocation analysis. Ng began his investment career with BlackRock’s Asia equity team as an equity specialist. He holds a BSc in applied finance from Macquarie University and a Master of Commerce in funds management from the University of New South Wales.
As the first international provider of mainland Chinese benchmarks, FTSE Russell provides international and domestic investors with an ever-expanding index product range that captures the full scope of China’s equity and fixed income markets. FTSE's comprehensive and complementary set of indices represents all the main China share classes to combine and dissect the market to suit any domestic or international mandate.
FTSE Russell’s China flagship equity benchmarks include the FTSE China A50, FTSE China 50, FTSE Hong Kong 100 and more. A range of fixed income benchmarks cover a wide array of subindices available in any combination of sector, maturity and rating.
Emerald Yau is Head of Equity Index Product Management at FTSE Russell Apac.
Based in Hong Kong, Yau is a seasoned international investment professional. Prior to joining FTSE Russell in 2020, she was an investment director at Capital Group, promoting global equity strategies. Before that, Yau was a product strategist at with BlackRock, covering Asian fixed income and Asian equities. Earlier in her career, she covered structured alternatives at Shinsei Bank in Tokyo and asset-backed securities at Lehman Brothers in New York. Yau is a CFA charter holder, and earned her BSc degree from Columbia University.
Andy Ng
iShares Investment Strategist, Asia-Pacific
BlackRock
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