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China’s exchange traded fund industry has surged in recent years, buoyed by record high inflows into equities strategies and amid a slump in the take-up of active funds, according to Morningstar research.
Total annual inflows into China ETFs reached Rmb604.3bn ($83.3bn) in 2023, the research firm’s latest China ETF Asset Flows report shows.
The figure is almost five times the Rmb127.2bn in inflows recorded in 2021 and almost double from the Rmb387.2bn in 2022.
It also marks a complete turnaround from the Rmb5.1bn in 2019 and the Rmb41.8bn in outflows in 2020, data shows.
This article was previously published by Ignites Asia, a title owned by the FT Group.
Strong inflows into China ETFs helped the sector realise Rmb1.82tn in assets as of end-December, according to the report.
The researchers noted there had been a “staggering” average annual growth rate of 40 per cent in total assets between 2018 and 2023, noting that the “explosive” growth came amid the “tepid” performance of the broad China A-share market, which pulled down actively managed funds.
Chinese investors instead flocked to thematic ETF products, such as those focused on alternative energy or technology, according to Wanda Wang, research manager at Morningstar and author of the report.
Regulator-led fund fee reforms have also led Chinese fund firms to slash fees on large broad-based ETFs, which further attracted inflows, she said.
The total number of ETFs in China had grown to 870 at end-2023, according to the report. Equities products comprised 96 per cent of all ETFs, at 834. There were only 17 bond ETFs, 17 commodities ETFs and two convertibles ETFs in the market.
Equities ETFs made up the bulk of total assets and accounted for the majority of the flows into the space. These products realised Rmb1.72tn in total assets as of last year, representing 94 per cent of the industry total.
Their growth broadly mirrored the development of the overall ETF industry. Equities ETFs “gained immense traction” over the three years, with annual inflows of Rmb575.6bn.
Morningstar attributed this to institutional investors’ robust buying of broad-based index-tracking ETFs, such as the Huatai-PineBridge CSI 300 ETF, E Fund Seeded CSI 300 ETF, ChinaAMC China 50 ETF, Harvest CSI 300 ETF and ChinaAMC CSI 300 ETF.
China’s ETF industry is also concentrated in the leading providers. The top three asset managers in this sector — China Asset Management, E Fund Management and Huatai-PineBridge Fund Management — have been at the top of the leaderboard for the past three years.
They accounted for around half, or 46 per cent, of total market share as of end-December, with ChinaAMC leading the pack with Rmb392.2bn in total assets to hold 21.6 per cent of the market.
The manager booked Rmb152.4bn in subscriptions during the year, representing a 67 per cent growth in inflows over 2022.
This was distantly followed by E Fund with Rmb256.9bn in total assets as of last year, 14.1 per cent of total market share. Huatai-PineBridge had Rmb193.8bn in assets representing 10.7 per cent of the ETF market.
*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.
Read More: China ETF assets register ‘explosive’ growth