Recent Surge in China ETF Fund Size Leads to Index Development
China ETF Assets Under Management Soar from 1.34 Trillion KRW at End of Last Year to 4.81 Trillion KRW by November This Year
[Asia Economy Reporter Gong Byung-sun] The Korea Exchange (KRX) will announce a joint index for cooperation between the Korean and Chinese capital markets.
On the 9th, KRX announced that as part of the Korea-China capital market cooperation project MOU signed with the Shanghai Stock Exchange in May, it plans to release the ‘KRX CSI Korea-China Joint Index’ on the 20th. CSI refers to the index calculation subsidiary jointly established by the Shanghai Stock Exchange and the Shenzhen Stock Exchange.
The Korea-China joint index is calculated by combining the indices calculated separately by KRX and CSI for their respective domestic companies, with each index weighted equally at 50%. Although the country weights are equally set at 50%, the weighting of individual stocks within each country’s index is determined based on free-float market capitalization.
This index development was driven by the rapid increase in assets under management of China ETFs among overseas equity ETFs recently listed domestically. In fact, assets under management of China ETFs increased approximately 259%, from about 1.34 trillion KRW at the end of last year to 4.81 trillion KRW at the end of November this year. Accordingly, the Korea-China joint index was developed to meet investment demand in the Chinese market and to enable simultaneous investment in leading companies and new growth businesses of both countries.
The indices consist of three types targeting leading companies in both countries and sectors of high investor interest: the ‘KRX CSI Korea-China Leading Companies 50 Index,’ the ‘KRX CSI Korea-China Electric Vehicle Index,’ and the ‘KRX CSI Korea-China Semiconductor Index.’
The KRX CSI Korea-China Leading Companies 50 Index is composed of a total of 50 stocks, with 25 leading companies from each country selected by prioritizing the top two companies by market capitalization in each industry. The index includes representative leading companies from both Korea and China such as Samsung Electronics, NAVER, Kweichow Moutai, and Ningde Times, providing the effect of diversified investment across various industries.
The KRX CSI Korea-China Electric Vehicle Index consists of a total of 30 stocks, with the top 15 electric vehicle manufacturers and electric vehicle battery-related companies by market capitalization from each country. The six battery companies included in the index held a global market share of 73.4% as of October this year, and the index is expected to represent the global battery industry going forward.
The KRX CSI Korea-China Semiconductor Index includes a total of 30 stocks, with the top 15 companies by market capitalization from each country within the semiconductor industry value chain. Korean companies such as Samsung Electronics have competitiveness in the memory semiconductor sector, while China is actively promoting policies focused on non-memory semiconductors, so the index is expected to show high growth rates in the future.
A KRX official stated, “The Korea-China joint index includes many companies with high investor interest and strong growth potential in the global market, so it will be used as a base index for various financial products such as ETFs. It is expected to expand capital market exchanges between the two countries by providing opportunities to access leading companies in the counterpart country at low cost.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
