China’s exchange-traded funds (ETFs) have experienced remarkable growth over the past five years, seeing a nearly fivefold surge in annual inflows, Morningstar’s June report reveals. According to Wanda Wang, Morningstar’s Research Manager, yearly inflows to Chinese ETFs skyrocketed from 127.2 billion yuan ($17.49 billion) in 2021 to 604.3 billion yuan in 2023. By the end of 2022, total assets under management (AUM) for China’s ETFs more than doubled since 2020, reaching 1.82 trillion yuan.
Between 2018 and 2023, the AUM growth rate averaged a striking 40% annually. Despite a lukewarm broader China A-shares market, niche industries showed promise, propelling the ETF market to record highs each year. As a result, actively managed funds struggled to outperform, contributing to the ETF market’s growth, doubling total AUM to nearly 2 trillion yuan in under three years.
The majority of these inflows were attributed to institutional investors favoring broad-based index-tracking ETFs, which constituted the bulk of the rapid inflow surge. Notably, equity ETFs gained substantial traction, making up 96% of China’s 870 ETFs by the end of 2023. Annual inflows to equity ETFs reached a record 575.6 billion yuan in 2023, surpassing total inflows from 2019 to 2022.
The booming semiconductor sector also attracted significant investments into sector-specific equity tech and communications ETFs, while the financial and real estate equity category saw net outflows. Fixed income ETFs, representing 4% of total ETFs, and commodity ETFs, largely gold-based, which accounted for less than 2%, have developed at a slower pace.
China’s ETF market is dominated by leading providers like China Asset Management, E Fund Management, and Huatai-PineBridge, which are the top three by AUM.
— Report contributed by Evelyn Cheng, CNBC.
Original Story https://www.cnbc.com/2024/07/10/chinese-etf-inflows-jump-5-fold-in-three-years-says-morningstar.html
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