Morningstar Publishes Guide about Investing in Chinese Equity Exchange-Traded Funds
HONG KONG — Morningstar Asia Limited, a subsidiary of independent investment research firm Morningstar, Inc. (NASDAQ: MORN), has published a “Guide to Investing in Chinese Equities via ETFs,” outlining the opportunities and risks investors face when accessing Chinese equities through exchange-traded funds (ETFs). Morningstar Asia ETF Strategist Jackie Choy will review the key highlights of the guide today at 3 p.m. HKT with journalists at Morningstar’s office at 99 Queen’s Road Central in Hong Kong.
Authored by Morningstar’s global ETF experts, the guide presents a comprehensive overview of global ETFs that offer exposure to Chinese equities, the nuances of investing in Chinese stocks, and the importance of an ETF’s underlying exposure and relevant fundamentals. Key considerations for investors include:
• In July 2013, the China Securities Regulatory Commission (CSRC) announced it would expand the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme to London and Singapore, which would allow qualified institutional investors to invest directly in onshore Chinese equities. Morningstar analysts expect this action will lead to the launch of RQFII ETFs in countries outside of Hong Kong;
• There are more than 50 country, sector, and strategy indices tracked by approximately 100 Chinese equity ETFs listed on various exchanges outside China, representing a total of USD$28 billion in assets under management, as of June 30, 2013;
• There are a number of risks associated with investing in Chinese equity ETFs, including ETF-specific structural risk, market risk, and currency risk. In addition, there are considerations regarding taxation and quota-related premiums and discounts for those ETFs investing in China A-Shares, or shares issued by companies incorporated in China that trade on the Shanghai and Shenzhen stock exchanges that are directly available to domestic Chinese investors, Qualified Foreign Institutional Investors (QFIIs), and RQFIIs.
“Chinese equities are popular among investors in Asia, and Chinese equity ETFs present a vehicle for global investors who’d like to tap opportunities in this country, especially as China expands its presence in the global financial markets,” Ben Johnson, Morningstar’s director of global passive fund research, said. “In recent years, the Chinese government has become increasingly keen to open its local securities market to the rest of the world. The growing crop of RQFII ETFs provides access to offshore investors looking for exposure to the local A-Share market, and these funds have successfully gathered assets. The expansion of the RQFII program and the success of RQFII ETFs have created the need for more investor education on these topics.”
Morningstar’s guide also covers the basics of investing in Chinese equities, the Chinese equity ETFs available to investors globally, how investors can use these ETFs in a portfolio, the general risks of investing in these vehicles, and frequently asked questions about Chinese equity ETFs. The guide is available at http://global.morningstar.com/GuideChineseEquityETFs.
About Morningstar Asia and Morningstar, Inc.
Morningstar Asia Limited is a subsidiary of Morningstar, Inc., a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on approximately 433,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on nearly 10 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has approximately $166 billion in assets under advisement and management as of June 30, 2013. The company has operations in 27 countries.
Morningstar expanded to Asia in April 2000 and has grown its businesses into Japan, Korea, India, mainland China, Taiwan, Singapore, Malaysia, and Hong Kong. The Asia operations not only offer timely information on mutual funds, but also insightful and independent analyses, unbiased fund ratings, and sophisticated analytical tools to help both individual and professional investors make better investment decisions.
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