Chinese ETFs see unprecedented capital inflows

Added 7th October 2015

While money market ETFs are losing their attractiveness due to near zero interest rates in most parts of the world, they are popular in China as the recent stock rout has investors turning to fixed-income products for safety.

Chinese ETFs see unprecedented capital inflows

The mainland’s CSI 300 index is trading 40% off its June highs and investors are rushing into money market ETFs at a pace unseen before in the ETF industry, according to a research note by Markit.

The eight Chinese listed money market ETFs, which invest in local short dated debt instruments and cash, have experienced the fastest AUM growth seen in any ETF asset class on record over the quarter with over $37bn of new inflows over the third quarter, more than tripling the $11.5bn AUM three months ago.

The net inflows into China-listed money market ETFs in the third quarter account for one-third of those seen by the global ETF industry over the quarter, according to the research note.

With IPOs suspended in the wake of the volatility, investors were forced “to shift funds dedicated towards IPO investing to money market products,” said Simon Colvin, a Markit analyst.

In contrast, money market ETFs listed outside China have seen their total assets under management dwindle more than half since 2008 to $7bn, as the calm and lacklustre yields drove investors withdraw from the asset class, according to Markit.

The two most popular products favoured by investors over that period are Fortune SG Money Market ETF and Yinhua Money Market ETF. The former is now the eighth-largest ETF worldwide and the largest fixed income ETF, according to Markit.

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