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HONG KONG, April 26, 2016 /PRNewswire/ -- The Chimerica ETF (3161.HK) outperformed traditional Chinese ETFs and indices by 33%, demonstrating the success of tracking blue chip new economy stocks on its one year anniversary. Furthermore, with the weight of the IT sector estimated to double in MSCI China upon completion of phase 2 (31 May 2016) of the MSCI ADR inclusion, Hong Kong based fund manager of the Chimerica Exchange Traded Fund, Enhanced Investment Products (EIP), anticipates an estimated US$40 billion -- US$70 billion of inflows into Chinese ADRs; stock that Chimerica holds in its entirety.
The second phase of the MSCI inclusion will come just after the one year anniversary of Asia's first ETF to provide pure-play, real-time access to Chinese companies listed in the US in one trade. Since 22 April 2015, Chimerica has enabled trading in Asian hours in companies like Alibaba, Baidu, JD.com, NetEase, Vipshop and Ctrip. Since inception the Chimerica ETF (3161.HK) continues to exert its position, not only as a pure play ETF that covers US listed Chinese ADRs, but as a benefactor of China's changing consumptions habits, growing middle class, and large global index changes.
The Chimerica ETF has shown strong returns, outperforming its peers by an average 33.4% in its first year, including 2823 HK (FTSE A 50), 3188 HK (CSI 300), 2800 HK (Hang Seng), MSCI China Index, and Shanghai Composite Index. *
As we enter phase 2 of the MSCI inclusion, scheduled for 31 May 2016, attention shifts to the 'new economy' and IT sector weight in MSCI China; which some analysts are estimating could double as a result of the inclusion of ADRs. Analysts have estimated US$40bn-$70bn inflows from passive and active buying as a result of the full inclusion. Chimerica holds all ADRs that are being included into MSCI China and none that will have their positions reduced to make room for new constituents in the index. Chimerica's Index was up 38% in the two months prior to phase 1 of the MSCI inclusion. ADR's currently account for 11% of MSCI China and they could see this weight double to approximately 20% at the end of the May.
"As the production side of the Chinese economy continues to slow, the consumption habits of Chinese individuals continue to favor positive earnings results for Blue Chip Chinese 'New Economy' stocks, in which Chimerica has a 99% weighting." says Tobias Bland, CEO at EIP, the fund manager of Chimerica.
The MSCI Inclusion is coming at an interesting time for Chinese ADRs as there has been a wave of ADR privatizations sweeping company headlines over the last few months; largely driven by the relative undervaluation to US peers and the new plans to change the lengthy registration process for Chinese IPOs by the CSRC. This combination of factors supports backdrop for likely continued strong performance of Chinese ADRs and the utilization of an ETF as a tool to systematically provide diversification without single stock risk.
Bland continues: "We are gearing up for an interesting time of year as we wait for phase 2 of the MSCI inclusion. We believe that many institutional investors have still not purchased ADRs and are likely to be positioning themselves for the second phase of the inclusion, just in time for their quarterly or year-end evaluation of performance. If ADRs strong performance continues versus other widely used China benchmarks, an underweight to these names at the end of June or December would mean managers would for the first time have to explain why they took an active bet against Chinese ADRs, which are the largest contributors to China's New Economy. This may play out at the end of the third or fourth quarter in 2016, when ADRs are expected to meaningfully impact performance based on their full weight and tenure in the index."
Given the ETF's focus on Chinese ADRs, Chimerica has an 89%** weight in the internet and technology companies. Investors can purchase these ADRs by purchasing the Chimerica ETF. For more information on the new ETF, Chimerica or XIE Shares please contact visit: www.xieshares.com.
For media enquiries, please contact:
PRIME
Laura Derry
Tel: +852 2973 0181
laura@pr-ime-asia.com
Eunice Lee
+852 2973 0017
eunice@pr-ime-asia.com
* Comparing to the average Net Asset Values (NAV) of broad China ETFs and Indices, including 2823 HK, 3188 HK, 2800 HK, MSCI China Index, and Shanghai Composite since inception, the Chimerica ETF has shown outperformance of 33.4%.
** Source FTSE and CLSA. April 20, 2016.
NOTES TO EDITOR:
ABOUT EIP
EIP was established in 2002. It is a Hong Kong based investment management firm focused on the Asia Pacific region. EIP launched XIE Shares Trust I* (*This is a synthetic ETF) and XIE Shares Trust II (together, XIE Shares ETF) in 2012 and 2015 respectively. XIE Shares ETFs are an extension of their cost-effective index product offerings in the form of exchange traded funds.
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