Invesco launches onshore China equity ETFs in Europe
Invesco has added two onshore Chinese exchange-traded funds to its lineup, both of which will use swaps to offer a synthetic replication model.
The Invesco S&P China A 300 Swap and Invesco S&P China A MidCap 500 Swap Ucits ETFs have been launched on stock exchanges in the UK, Germany, Italy and Switzerland.
The first product aims to track the performance of an S&P index that includes 300 of the largest stocks in the A-share market, while the second ETF tracks an index made up of the 500 largest stocks.
Gary Buxton, Invesco’s Head of ETFs and Index Strategies in Europe, Middle East and Africa, said: “China already has the second largest stock market in the world, and it is increasingly diverse.
“Our ETFs aim to provide investors with the ability to be more precise in their exposure.”
According to Invesco, the two indexes focus only on stocks of companies incorporated in mainland China and traded in renminbi on the Shanghai and Shenzhen stock exchanges.
The asset manager added that unlike some competing benchmarks, both indexes remove the companies from the Office of Foreign Assets Control sanctions list.
Each ETF will seek to achieve its investment objective by holding a basket of quality securities and entering into swap agreements with one or more major investment banks.
The securities are generally not the same as those in the index, but should provide investment return for the ETF.
Chris Mellor, Head of Emea Equity and Commodity ETF Product Management at Invesco, said: “The dynamics of China’s onshore stock market may provide a structural advantage for synthetic replication.
“Quantitative desks and hedge funds executing market-neutral strategies don’t have access to traditional methods of hedging market risk, so they often use bank-written index derivatives.”
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