China is looking to the west for more investing opportunities, and one of its largest mainland fund managers has kicked things off with an ETF based on Germany’s DAX.
The HuaAn Germany DAX 30 ETF and its feeder fund, which were introduced by HuaAn Asset Management Co. Ltd. on July 14, will be listed on the Shanghai Stock Exchange once final regulatory approval is granted. HuaAn has over $13 billion in assets under management, and according to data from Deutsche Bank, 83 ETFs are currently listed in China with total assets under management of $23.9 billion.
STOXX Limited, which is the official marketing agent for the indices of Deutsche Börse and SIX, including the DAX, worked with HuaAn to bring about the new fund, which, while it is the first European ETF in China, is not the first European expansion into Asia this year. In April, the EURO STOXX 50 Index was licensed to Mirae Asset Global Investments for an ETF listed in Seoul on April 30.
Germany, however, has been a particular focus of China for a while. Perhaps it’s only natural that the first ETF in China based on a European index should be centered on Germany, since a decade ago China chose Germany’s Xetra trading platform to use for the Shanghai exchange.
Here are three reasons why the new ETF could help to cement investing ties between the two countries.
1. It opens the door. There’s already sizeable Chinese direct investment in Germany—more about that in a minute—but the new fund offers more Chinese investors access to the DAX, which measures the development of the 30 largest and most liquid companies on the German equities market and represents around 80% of the market capitalization authorized in Germany.
Johnny Lau, of HuaAn’s marketing department, said that the ETF’s target market was mainly “institutional investors, as well as clients who are interested in asset allocation. Meanwhile, the retail customers will be satisfied by the feeder fund.”
While the new ETF was currently “welcomed by [all] kinds of clients, we expect it to be the largest new launched qualified domestic institutional investor (QDII) fund [on the] China mainland in [the] last three years,” he said.