Category Investments

Initial public offering opens for new Satrix MSCI China ETF

01 July 2020 Satrix

Satrix adds to global ETF range

The initial public offering (IPO) for the new Satrix MSCI China ETF opens on Wednesday, 1 July 2020. This is the seventeenth exchange traded fund (ETF) from Satrix, and the fifth in its global ETF range. The new Satrix MSCI China ETF will track the MSCI China Index, giving investors access to the broader Chinese equity market in a single trade.

Helena Conradie, Satrix CEO says, “Our global ETF range has been very popular with investors seeking to diversify their portfolios. We track the MSCI World, MSCI Emerging Markets IMI, S&P 500 and Nasdaq-100 indices. Following the Satrix MSCI China ETF listing, we intend to further expand our global ETF offering over the next quarter.”

Investors will be able to access this global ETF in South African rand. Satrix will replicate the index by investing in the iShares MSCI China UCITS ETF, a total return ETF, which means all dividends are automatically reinvested.

iShares is the exchange traded funds (ETFs) business of BlackRock, the leading global asset management firm. It is the largest provider of ETFs globally.

Khoabane Phoofolo, Head of BlackRock Africa comments, “More and more investors are choosing ETFs to build diverse portfolios for achieving their investment goals. We are pleased to partner with Satrix to provide South African investors with greater choice by expanding its global ETF offering.”

About the index

The MSCI China Index includes large and mid-cap shares across China A shares, H shares, B shares, Red chips, P chips and foreign listings (e.g. ADRs). With 704 constituents, the index covers about 85% of this China equity universe.

The MSCI China Index is dominated by companies in the consumer discretionary, communication services and financial sectors. Familiar names like Alibaba Group and Tencent Holdings are the two largest constituents of the MSCI China index.

Is now the time to be investing in China?

China is the world’s largest emerging market. It has the second largest bond and stock market globally. Despite the size of the market, it is under-owned by foreign investors. Now, as fears around corporate governance, a slowing economy and political protests in Hong Kong grow, we raise the question again – is now the time to be an investor in China?

As China moves from an export-driven economy to one of domestic consumption, the sheer size of its populations makes it an attractive investment, especially in industries like technology, healthcare and luxury goods. This also means that as the trade war between China and the US ebbs and flows, Chinese companies, especially those which focus on the mainland, are less affected and more inclined to grow.

China is the second largest recipient of foreign direct investment capital (FDI) in the world. FDI follows investor confidence in a region and is used for manufacturing and service capabilities. In 2019, China received $137bn in FDI.

Investor regulations have been revised over the last decade or more, making it easier and more appealing for foreigners to invest. This has seen the inclusion of China A shares in MSCI emerging market indices, giving them greater visibility.

As the Chinese middle class continues to grow, citizen-friendly fiscal and consumer reforms should be forthcoming, which could support mainland demand and ultimately a wide variety of listed corporates.

China has demonstrated its ability to drive economic growth. Into the future this will be further supported by increased infrastructure; policy reform; global competitiveness; a large and increasingly educated workforce; and export friendly policies. Overlay this with an ever-increasing consumer demand and this just may be an investment opportunity you don’t want to ignore.

Investing in China is, however, not without risks. China is a communist country. It has been criticised for selective disclosure on various issues as well as regulatory differences with the west. It has been accused of turning a blind eye to insider trading and Chinese companies adhere to their own accounting policies, which differ from GAAP. Smart investors always weigh up risks before investing. Many of China’s blue-chip companies are listed on foreign stock exchanges too, which would hold them to their own regulatory standards. One way of accessing the Chinese market with relative peace of mind would be through a well-diversified ETF.

How to access the IPO

Investors will be able to access the Satrix MSCI China ETF via, which has no minimum investment amount. The IPO will also be available via all other investment platforms and personal stockbroking accounts.

Investors who participate in the IPO will pay no brokerage fees on the initial investment and will participate in the performance of the ETF from the first day it trades on the Johannesburg Stock Exchange.

The anticipated date of listing on the JSE is Wednesday, 22 July 2020.

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