1.E Fund (HK) MSCI China A50 Connect ETF (the “Fund”) is a passively managed exchange traded fund (“ETF”) and is traded on the Stock Exchange of Hong Kong (“SEHK”) like stocks. The investment objective is to provide investment result that, before fees and expenses, closely corresponds to the performance of the MSCI China A 50 Connect Index (the “Index”). The Manager will adopt a combination of a physical representative sampling strategy and a synthetic representative sampling strategy. For direct investments in Index Securities listed on the Shanghai and Shenzhen stock exchanges, the Fund will invest primarily through the Stock Connect and/or the Manager’s QFI status. By adopting a synthetic representative sampling sub-strategy (which involves investing up to 50% of its NAV in FDIs), the Fund will only invest directly in funded total return swap transaction(s)
2.The Fund is subject to a) Investment risk, b) Equity market risk, c) New Index risk, d) Concentration risk and Mainland China market risks, e) Risks associated with the Stock Connect and QFI regime , f) Risks associated with investments in FDIs, g) Trading differences risk, h) Passive investments risk,, i) Trading risk, j) Tracking error risk, k) Dual counter risks, l) PRC tax risk, m) Reliance on market maker risk, n) Other currency distribution risk, o) Termination risk..
3.Based on professional and independent tax advice, (i) the Fund will make relevant provision of 10% on dividend and distribution income from A-Shares if PRC corporate income tax (“CIT”) is not withheld at source at the time when such income is received (where CIT is already withheld at source, no provision will be made) and (ii) the Manager does not currently make withholding income tax provision for gross realised or unrealised capital gains derived from trading of A-Shares (either via Stock Connect or QFI).
4.There are risks and uncertainties associated with the current PRC tax laws, regulations and practice in respect of capital gains realised via QFI or Stock Connect on investments in the PRC (may have retrospective effect). Any increased tax liabilities on the Fund may adversely affect the Fund’s value. If taxes are levied in future on the Fund for which no provision is made, the Fund’s NAV will be adversely affected. In this case, the then existing and subsequent investors will be disadvantaged as they will bear for a disproportionately higher amount of tax liabilities as compared to the liability at the time of investment in the Fund.
5.You should not make any investment decision solely based on the information on this material alone. Please read the relevant offering documents for details including the risk factors before making any investment decisions. Investment involves risk. Past performance is not indicative of future performance. This document has not been reviewed by the Securities and Futures Commission of Hong Kong.
The MSCI China A50 Connect Index has three major characteristics: Firstly, the historical performance of the index is better than other main broad-based indexes. From the perspective of historical cumulative return rate, the price index return rate and the total return performance of investments with the dividends reinvested have all outperformed the CSI 300, FTSE Russell A50 and MSCI China A-Share Index (the parent index) in the past 10 years. Secondly, the industry distribution is balanced with a high proportion of new economy. Compared with other main broad-based indexes, the MSCI China A50 Connect Index has significantly increased the proportion of new energy, electronics, medicine and other sectors. Thirdly, the component stocks comprise leader companies in various industries, with excellent profitability and growth, which are regarded as China’s core assets, which are highly recognized by foreign institutional investors. It is an effective investing tool for investors to focus on the A Shares leaders and capture the China opportunities.
MSCI Company highly regards the importance of Chinese assets. In May 2018, MSCI officially announced the inclusion of China A Shares in its flagship index system. Through step-by-step implementation, MSCI increased the inclusion ratio of China A shares from 5% to 20% in the MSCI Emerging Markets Index in 2019. The market expects the proportion of MSCI’s inclusion of China A Shares may increase to 50% in 2027, which is equivalent to an average of 200-400 billion RMB flowing into China A Shares from overseas assets each year.
HKEX Co-Head of Markets Wilfred Yiu said: “We warmly welcome the listing of E Fund (HK) MSCI China A50 Connect ETF that tracks the MSCI China A 50 Connect Index. It will join the increasingly diversified Connect product ecosystem in Hong Kong, enriching the choice for investors around the world, and providing another investment option for those seeking exposure to China assets. HKEX looks forward to working with its clients and the market on continuing to build Hong Kong’s attractiveness as an offshore RMB hub and international trading, risk management and capital raising centre.”
Doug Walls, APAC Head of Index Products at MSCI, said, “The MSCI China A 50 Connect Index follows an innovative sector-balanced approach that aims to ensure diversified and balanced representation of the broader China A market. It is designed to enable international and domestic investors to track China’s sector leaders and get exposure to the overall market, including the potential opportunities in China’s new economy. The index marks another milestone since the inclusion of A-shares in MSCI indexes. At the same time, index-linked ETFs and other financial products will provide global investors with more opportunities to access the broad and diversified China market.”
Gaohui Huang, CEO of E Fund Management (HK), said, “With the increase of China’s economic influence in the world and the further opening up of the financial markets, China A-share assets will play an even more important role in global investors’ portfolios. We believe that E Fund (HK) MSCI China A 50 Connect ETF will become an essential tool for domestic and foreign investors to allocate A-share assets. “
E Fund (HK) MSCI China A50 Connect ETF
Stock Code: 03111.HK (HKD counter) 83111.HK (RMB counter)
Exchange Listing: HKEX – Main Board
Listing Date: 14th-December-2021
Underlying Index: MSCI China A 50 Connect Index (Price return)
Trading Currency: RMB
Counter Currency: RMB/HKD
Investment Channel: Mainland China-Hong Kong Stock Connect, RQFII (Mainly by Mainland China-Hong Kong Stock Connect)
Investment Strategy: A combination of (i) primarily a physical representative sampling strategy and (ii) a synthetic representative sampling strategy as an ancillary strategy.
Portfolio Composition File Basket Share: 1,000,000
Fund Initial Net Value: 2.6 RMB (subject to the final price before listing)
Management Fee Rate: 50 bp (p.a.)
Expected Total Expense Ratio (TER): 80 bp (p.a.)
Derivative Use: Yes, derivative does not exceed 50%
About E Fund Management (HK) Co., Ltd.
As the international business platform of E Fund, E Fund HK provides bilateral and cross-border asset management services in fixed income, equity (include active management strategy and ETF product lines) and global asset allocation for investors all over the world. E Fund HK has an established presence in Hong Kong for many years and has since listed a number of mutual funds, private equity funds and ETFs in Hong Kong, Europe and the US. Its award-winning products have been recognized by leading institutions such as Morningstar, Lipper, Asian Investor and Benchmark for their strong performances relative to peers..
E Fund HK has nearly 10 years of index investment experience. The company has abundant practical experiences in the offshore ETF market. E Fund HK cooperate with many international institutions, and issued products in Hong Kong, Europe and the US. In 2012, E Fund HK issued a product tracking the CSI 100 Index. In 2014, E Fund HK issued a product tracking Chinese government bonds, and issued a UCITS product about China A shares with a European company. In 2014, E Fund HK and a US fund company jointly issued an ETF in United States. In 2017, E Fund HK and Yuanta Securities jointly issued a leveraged ETF and an inverse ETF tracking the Hang Seng Index.
The MSCI series of indexes developed by MSCI are widely used by global portfolio managers as benchmark indexes, with an asset scale of more than US$16 trillion, including more than 1,200 index ETFs with an asset scale of more than US$1.2 trillion.
MSCI Index Disclaimer
The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or securities or any index on which such funds or securities are based. The Prospectus issued by E Fund Management (Hong Kong) Co., Limited (“E Fund HK”) contains a more detailed description of the limited relationship MSCI has with E Fund HK and any related funds.
Copyright 2021. E Fund Management (Hong Kong) Co., Limited. All rights reserved.
The Fund has been authorized by the Securities and Futures Commission of Hong Kong (“SFC”) but such authorization is not a recommendation or endorsement of a scheme nor does it guarantee the commercial merits of a scheme or its performance. It does not mean the scheme is suitable for all investors nor is it an endorsement of its suitability for any particular investor or class of investors. Investment involves risk. Past performance is not indicative of future performance. The investment returns are denominated in RMB. HK dollar-based investors are therefore exposed to fluctuations in the HK dollar/RMB exchange rate and investing in funds denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may cause a loss of principal. Please refer to the offering document for details of the Fund including the risk factors. This document has not been reviewed by the SFC. Issued by E Fund Management (Hong Kong) Co., Limited.
This document is neither an offer nor solicitation to purchase units of the Fund. Distribution of this document may be restricted in certain jurisdictions. This document does not constitute the distribution of any information or the making of any offer or solicitation by anyone in any jurisdiction in which such distribution or offer is not authorized or to any person to whom it is unlawful to distribute such a document or make such an offer or solicitation.
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