JSE lists first focused exchange traded fund that allows access to China's equity markets
CAPE TOWN - Local investors, who are likely to already be quite heavily exposed to developments in China in their JSE investment portfolios, now also have a China-focused ETF to invest in.
The JSE yesterday listed its first China-focused Exchange Traded Fund (ETF), the Satrix MSCI China ETF.
The ETF tracks the MSCI China Index, which would provide investors access to the broader Chinese equity market, a statement from the JSE said,
The Satrix MSCI China ETF exposes investors to an array of Chinese industries, from online commerce, financials, communication services and many others.
Satrix chief executive Helena Conradie said the global ETF range had been popular with investors seeking to diversify their portfolios.
“We track the MSCI World, MSCI Emerging Markets IMI, S&P 500 and Nasdaq-100 indices. The investor interest in the initial public offering for the Satrix MSCI China ETF has far exceeded our expectations - it is the most successful IPO since the Satrix 40 launched in November 2000,” she said.
This year is the 20th anniversary of ETFs listing on the JSE, and the 75 ETFs recently surpassed the R100bn market capitalisation.
JSE Capital Markets director Valdene Reddy said “with global markets experiencing increasing volatility, ETFs provide alternative investment options with varying diversification, hence we are thrilled to add the Satrix MSCI China ETF to our mainboard.”
Old Mutual Wealth Investment Strategists Izak Odendaal and Dave Mohr said the future of China was of more than just academic interest to South African investors, given their relatively big exposure to China.
China is the world's biggest importer of raw materials from South Africa. Developments in China already shaped the world economy, but it was also playing an increasing role in global financial markets.
Being the first country where the Covid-19 virus was detected, it was also the first country to more or less bring the virus under control, and restart its economy.
In the first quarter its gross domestic product fell 6.8percent in real terms from the same quarter in 2019, while in the second quarter, it grew 3.2 percent - average growth in the five years prior to the pandemic was 7percent, so its economy is not yet healed.
China’s ability to add or detract to risk appetite among global investors also had a key bearing on South Africa.
“As we've seen time and again, our financial markets rise and fall on tides of global risk appetite and capital flows,” Odendaal and Mohr said.
The JSE had substantial direct and indirect exposure to China. Apart from Richemont and the mining companies, Naspers was still largely a Chinese internet company, even though it was taking steps to grow beyond its stake in Tencent.
“The size of Naspers/Prosus, Anglo American, BHP and Richemont on the JSE means South African investors in a typical balanced fund are significantly exposed to China. The global equity holdings in most balanced funds will also have direct and indirect exposure to China,” the strategists said.
The JSE, commodity prices, capital flows and the rand were also all heavily and regularly influenced by Chinese developments, they added.