Demand for China A-share funds is booming due largely to greater uptake in the Asian region, a new report from the Singapore Exchange (SGX) has found.
Six new A-share funds have been released in Korean, Japan and Hong Kong since December, while key A-share indices, the CSI300 and FTSE China A50, increased by 5.5% and 6% respectively, the SGX My Gateway report stated.
In 2012, exchange traded funds (ETFs) tracking the China A-Share market saw some of the largest inflows of any ETF sector. According to the report, total assets under management have more than doubled over the past two years, growing from US$9.5 billion in December 2010 to over US$20 billion in December 2012.
Further liberalising of rules governing inflows into Chinese shares is also a factor in this trend. Last year, the total qualified foreign institutional investor quota (QFII) reached US$80 billion, while the Chinese currency version for the scheme, renminbi QFII, or RQFII, was extended by RMB250 billion.
RQFII gives Chinese firms with renminbi reserves based outside China for tax reasons a way to gain exposure to Chinese assets from outside the country.
Marty Sun, director in the emerging markets equities trading desk of Credit Suisse, said liquidity in offshore China A-share products like the SGX FTSE China A50 Index Futures and the QFII/RQFII ETFs had grown significantly in recent months.
"As this diverse, growing and still-young marketplace matures, there remain ample arbitrage opportunities in Chinese equities, given the sheer size and liquidity of the domestic marketplace and its underlying volatility," he said.