The HK Exchange has just launched the world’s first dual counter product – the Harvest MSCI China. Traded in both renminbi and Hong Kong dollars, it is the world’s first Exchange Traded Fund (ETF) based on MSCI China A, an index that’s used by most public funds and also qualified foreign institutional investors (QFII).
Now while we know that ETFs allow retail investors to put their money into a wider basket of equities rather than single stocks, up until now, they have been denominated in single currencies only. Here in Hong Kong, investors are increasingly interested in Chinese stocks, hence the appeal of renminbi denominated funds.
With the launch of the Harvest MSCI China ETF, the Hong Kong stock exchange has beat Singapore to a dual counter fund. But what really is the advantage of dual counter?
“This means that people can operate this ETF with two trading currencies,” said Michelle Chua,Regional Head of Business Development, Harvest Global Investments Ltd. “People can trade on either the renminbi or HK$ counter; or they can buy in one currency and sell in the other.”
In a nutshell, far more flexibility in trading and settlement which is perfect for Hong Kong investors as it gives them th opportunity to play the currencies along with investments.
The ETF is different to others in that not only does it provide direct access to Asian markets but the underlying index is different. A pure stock ETF, it is the first ever based upon MSCI China A, which provides significant breadth in securities. With about 541 shares, there is much more mid cap representation. “We believe that broad is beautiful,” said Deborah Yang, Head of Index Business for MSCI, “It translates to less concentration in banks and more in consumer industries.”
That’s exactly what you want to focus on given that most analysts point growth in China resulting from domestic cosumption. And given that according to Jerry Wang, Portfolio Manager for the MSCI China A Index, the China A market has reached the bottom, now might be a perfect time to invest. That and the fact that Navratri has just begun!