Satrix launched its seventeenth ETF on Wednesday, with the opening of the IPO for the Satrix MSCI China ETF. The fund will invest directly into the iShares MSCI China Ucits ETF, which is managed by global asset management giant BlackRock.
The iShares product tracks the MSCI China Index, which captures the large and mid cap sectors across China A shares, H shares, B shares, Red chips, P chips and foreign listings. It currently has 704 constituents, with a total market capitalisation of just over $2tn. This covers about 85% of the Chinese equity universe.
The index is heavily concentrated in its top two holdings – the tech giants Alibaba and Tencent. They carry weightings of 17.6% and 14.8% respectively.
The third largest constituent is China Construction, at a weighting of 3.7%.
'As China moves from an export-driven economy to one of domestic consumption, the sheer size of its populations makes it an attractive investment, especially in industries like technology, healthcare and luxury goods,' Satrix said in a statement. 'This also means that as the trade war between China and the US ebbs and flows, Chinese companies, especially those which focus on the mainland, are less affected and more inclined to grow.'
It added that as investor regulations have improved, it has become easier and more appealing for foreigners to invest in Chinese equities. The inclusion of China A shares in MSCI's emerging market indices has also given them greater visibility.
'Investing in China is, however, not without risks,' said Satrix. 'China is a communist country. It has been criticised for selective disclosure on various issues as well as regulatory differences with the west. It has been accused of turning a blind eye to insider trading and Chinese companies adhere to their own accounting policies, which differ from GAAP.
'Smart investors always weigh up risks before investing. Many of China’s blue-chip companies are listed on foreign stock exchanges too, which would hold them to their own regulatory standards. One way of accessing the Chinese market with relative peace of mind would be through a well-diversified ETF.'
The Satrix product is the first JSE-listed ETF to give investors exclusive exposure to Chinese equities. Deutsche Bank previously managed an exchange-traded note (ETN) that tracked the MSCI China Index, but this was de-listed in January this year.
Satrix noted that it is also planning further product launches over the next three months.
'Our global ETF range has been very popular with investors seeking to diversify their portfolios,' said Satrix CEO Helena Conradie. 'We track the MSCI World, MSCI Emerging Markets IMI, S&P 500 and Nasdaq-100 indices. Following the Satrix MSCI China ETF listing, we intend to further expand our global ETF offering over the next quarter.'