The ETF affords ESG-tilted exposure to Chinese A-shares.

On October 15, the Haitong MSCI China A ESG ETF will open for trading on the Hong Kong Stock Exchange Main Board. It is the first ESG ETF offering exposure to Chinese A-shares to list on the Hong Kong bourse. (ETF Strategy)

Haitong MSCI China A ESG ETF

The new ETF tracks the MSCI China A ESG Universal Index.

The MSCI China A ESG Universal Index is based on the MSCI China A Index, its parent index, and includes large and mid-cap Chinese securities listed on the Shanghai and Shenzhen exchanges. The index covers only those securities that are accessible through “Stock Connect”.

The index is designed to reflect the performance of an investment strategy that, by tilting away from free-float market cap weights, seeks to gain exposure to those companies demonstrating both a robust ESG profile as well as a positive trend in improving that profile, using minimal exclusions from the MSCI China A Index.

Whereas the MSCI China A index includes 475 constituents, the MSCI China A ESG Universal Index comprises only 429 names.

While the MSCI China A Index has delivered gross annualized returns (September 30, 2020) of 9.67% since May 31, 2018, the MSCI China A ESG Universal Index has delivered 8.57% in the same period.

The passively managed ETF will charge a fee of 1.04% including a management fee of 0.60% per annum.

It is a sub-fund of the Haitong ETF Series, which is an umbrella unit trust under Hong Kong law.

China A-Shares an investing opportunity

Last month, speaking on CNBC’s ETF Edge, Luke Oliver, head of index investing for the Americas at DWS Group, said China, the world’s second-largest economy, presented a “huge opportunity” for investors as it recovers from the coronavirus’s economic damage.

In his view, China A-shares are generally undervalued because “investors are structurally underweight China…because of historical access issues and liquidity issues, most benchmarks don’t include as much China as they should.”

“So, there is a big upside with China,” Oliver said. “China had its V-shaped recovery complete by Q2 this year and it’s the only country we think will be back on track to its 2019 levels by year-end.”

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