① With the theme of "Index Iteration", the Shenzhen Stock Exchange and China Finance Online launched the second ETF ecology conference; ② How to effectively create cross-border ETFs, Invesco Great Wall Fund presented a two-way interaction sample introduction.
On December 24, China Finance Online reported (journalist Yan Jun) on how ETFs can develop differentiated paths? On December 19, at the ETF ecology conference co-hosted by the Shenzhen Stock Exchange and China Finance Online, General Manager Kang Le of Invesco Great Wall Fund introduced that "characterization" and "internationalization" are the strategic directions for Invesco Great Wall Fund's ETF business.
How to practice "bringing in" and "going out"? Kang Le introduced that, on one hand, Invesco Great Wall, with the support of foreign shareholders, has created a batch of unique cross-border ETF products to provide more diversified cross-border investment tools for domestic investors; on the other hand, by adhering to the idea of "going out", three of the company's products are included in the ETF mutual connectivity, among which Invesco Great Wall Invesco Great Wall CSI Dividend Low Volatility 100 ETF was successfully included in the Hong Kong Mandatory Provident Fund Authority in September this year, becoming one of the first domestic ETFs to be included and qualified to receive overseas retirement funds. In addition, the Chinext 50 ETF issued by Invesco Great Wall's foreign shareholders is listed on five major exchanges in Europe, including Ireland.
Kang Le pointed out that as overseas investors' demand for China's SSE A Share Index assets continues to increase, the SSE A Share Index will provide various forms of A-share investment tools for overseas investors in the global market in the future.
The second ETF ecology conference focused on the theme of "Index Iteration", with representatives from regulatory bodies, index companies, brokerages, funds, and banks discussing topics such as the development and innovation of indices, new opportunities in index investment, and the important role of derivatives in the development of index investment, promoting a good ecosystem for the high-quality development of the ETF market shared by all market participants.
Innovative products "bringing in" to enrich domestic investment channels.
Why create ETFs? And why choose to develop the characteristics of cross-border ETFs?
Kang Le introduced that at the end of 2021, the company began to elevate the strategic positioning of its ETF business. At that time, the competitive landscape of ETFs had already taken shape, with leading participants holding the majority of the market share. How to break the situation was the biggest challenge at that time.
With the steady advancement of high-level two-way opening of the Capital Markets, the central financial work conference pointed out that efforts should be made to promote high-level financial openness, emphasizing both "bringing in" and "going out," steadily expanding institutional openness in the financial sector, and enhancing the facilitation of cross-border investment and financing.
Kangle observed that more and more excellent indexes have been "brought in," enriching the investment categories for domestic investors, while many excellent indexes have also "gone out," providing overseas investors with opportunities to invest in China Assets.
In terms of "bringing in," cross-border ETFs have shown significant growth trends. Since 2018, the number and scale of domestic cross-border ETFs have risen rapidly. The compound annual growth rates over the past five years have reached 50.65% and 81.71%, respectively. In particular, the scale's compound growth rate significantly exceeds that of popular tracks such as broad-based, smart-beta, and industry themes. The investment scope has expanded from the initial focus on Hong Kong and the USA to include Japan, South Korea, Saudi Arabia, Southeast Asia, Germany, France, and others, providing more convenience for domestic investors.
Among them, the Shenzhen Stock Exchange's cross-border ETFs continue to maintain a high growth trend. As of the end of November, the scale of cross-border ETF products on the Shenzhen Stock Exchange exceeded 140 billion yuan, with nearly 60 products, and the five-year scale compound growth rate was 93%, surpassing the industry average.
"Over the past three years, with strong support from the Shenzhen Stock Exchange and partners, Invesco Great Wall has formed a certain level of competitiveness around the two strategic directions of 'internationalization' and 'specialization.' By adhering to both 'bringing in' and 'going out,' and having good interactions with shareholders like Invesco Group in terms of products, promotion, and cross-border cooperation, a product line for Beta upgrading has been created," Kangle stated, noting that in three years, the ETF scale has grown more than 14 times, marking some specialized progress in the domestic ETF field.
Through cooperation with shareholders and Nasdaq companies, Invesco Great Wall Fund exclusively issued Nasdaq Technology Index products, which focus on tech stocks within the Nasdaq 100. Driven by leading tech stocks in the US market, the index has outperformed the Nasdaq 100. As of November this year, the index's excess returns over the past ten years compared to the Nasdaq 100 Index have reached 160%. Source: Wind, from 2014.12.01 to 2024.11.30, with respective increases of 542.98% and 382.51%.
In addition to the Nasdaq Technology ETF, in terms of bringing in excellent indexes, Invesco Great Wall has cooperated with several excellent partners, including China Securities Index, Hang Seng Index, S&P Index, and Nasdaq, successively launching the only global chip LOF that indirectly invests in the PHLX Semiconductor Index by the end of this year, the S&P Cons Stap ETF selecting leading consumer stocks from the S&P 500, the Hong Kong stock Technology 50 ETF targeting the upgrade of Hang Seng Technology, and the Hang Seng Cons Stap ETF that outperformed the Hang Seng Index. (Source: Wind, since the establishment of the Hang Seng Cons Stap ETF on 2023.4.12 to 2024.12.24, yields are -10%, during which the Hang Seng Index yield is -19.26%)
To help domestic indexes go overseas, the GEM leads the wave of Shenzhen Stock Market indexes going abroad.
While "bringing in" investments, there is also an active effort to "go out." Kang Le stated that, on one hand, the ETF interconnection mechanism is running well, and the symbol products continue to expand. On the other hand, the successful overseas deployment of excellent A-share indices has attracted more attention from international investors.
This year marks the second anniversary of the ETF interconnection mechanism between the mainland and Hong Kong markets. Over the past two years, the number of symbols has continually enriched, from the first batch of 87 ETFs to the current 241 ETFs. The trading activity of ETF interconnection has also significantly improved, showing a steady growth trend in trading volume. The ETF interconnection mechanism has had a profound impact on promoting the integration of capital markets, expanding the investor base, providing diversified investment channels, enhancing market vitality and liquidity, and especially enhancing the international influence of China's capital markets.
In terms of participation in cross-border projects, in July 2023, Invesco Great Wall Chinext 50 ETF and Invesco Great Wall CSI Dividend Low Volatility 100 ETF were included in the fourth batch of ETF interconnection list. Although the inclusion came late, benefiting from the advantages of shareholders in overseas customer networks, the Invesco Great Wall CSI Dividend Low Volatility 100 ETF has been approved for inclusion in the MPFA investment pool, becoming one of the first domestic ETFs to be included and qualifying to undertake overseas retirement funds.
Kang Le pointed out that promoting ETFs to overseas sovereign and retirement funds is a mature practice in overseas markets and a differentiated breakthrough for Invesco Great Wall in this regard.
In addition to the ETF interconnection mechanism, the overseas deployment of core A-share indices has rapidly developed since the first Csi 300 Index was listed on the Hong Kong Stock Exchange in 2007. Currently, there are more than 180 ETFs listed in overseas mainstream markets that invest in Chinese concepts, with a scale of nearly 60 billion USD, mainly linked to core A-share indices such as Csi 300, CSI 500, and Chinext Price Index. The listed exchanges include regions such as Hong Kong, USA, Japan, Singapore, and Europe.
As a core index of the Shenzhen Stock Market, the Shenzhen Stock Exchange has been actively promoting the internationalization process of the related indices of GEM. Currently, the Chinext Price Index has successfully landed on the Hong Kong Stock Exchange, Korea Exchange, NYSE, and Singapore Stock Exchange, among others. Other core indices of the Shenzhen Stock Market, such as Deep 100, Bay Chuang 100, and this year's widely followed Chinext 50 Index have also been successfully listed on overseas mainstream exchanges in turn.
On June 18 of this year, on the occasion of the tenth anniversary of the Chinext 50 Index, the first Chinext 50 ETF in Europe was successfully listed on major exchanges in Europe such as Ireland. The successful overseas deployment of the Chinext 50 Index is another important testament to the "going out" of Chinese indices in the context of high-quality financial opening.
Kang Le stated that in the future, plans will continue to bring in quality assets, collaborate with exchanges and index companies to jointly develop cross-border investment solutions that meet the configuration needs of domestic investors, and improve the diversity of cross-border investment products; at the same time, leveraging shareholder resources and utilizing their overseas customer networks to promote more representative high-quality indices of China to overseas markets, enhancing the international recognition of Chinese assets. Additionally, the company will also focus on liquidity ecosystem construction and investor education to enhance the efficiency and convenience of cross-border investments and deepen investors' understanding of cross-border investments.