Business

Competition heats up in China’s $136 billion ETF market

SHANGHAI: China's fast growing US$100 billion (S$136 billion) market for exchange-traded funds is luring plenty of new entrants, intensifying competition in a market some predict will dethrone Japan to become Asia's largest in five years.

TaiKang Asset Management launched its first exchange-traded fund (ETF) this month, just weeks after Tianhong Asset Management, controlled by Jack Ma's Ant Financial Group, entered the ETF space.

The eye-catching ETF prospects in the world's second-biggest economy have also enticed global ETF giant Vanguard, which formed an investment advisory venture with Ant in June.

ETFs, which are low-cost investment funds that typically track an index and trade like stocks on exchanges, have caught on in China as stock-picking active fund managers increasingly struggle to beat the benchmark indices. Individuals are also embracing ETFs to diversify risks.

"Retail investors in China are finding it more and more difficult to make money through trading individual stocks," said Mr Freddie Chen, a managing director at Vanguard.

"ETFs are also appealing to institutional investors as a handy tool for asset allocation," he added.

According to fund consultancy Z-Ben Advisors, equity ETFs, the predominant form of ETFs in China, have almost doubled in size over the past year to exceed US$70 billion.

Despite its rapid growth, China's ETF market is still 10 years behind the US and represents a small fraction of the US$5 trillion global ETF assets, said Mr Philippe El-Asmar, head of Asia Beta Strategies at JP Morgan Asset Management. - REUTERS

BUSINESS & FINANCE