Underused Singapore-China ETF link set for revamp in 2025

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A flurry of new exchange traded funds are set to be added to the master-feeder scheme linking Singapore and Chinese exchanges that has seen slow take-up since its launch at the end of 2021.

Fund firms in the two markets have faced difficulties in agreeing commercial partnerships and China’s slumping markets have also slowed the product pipeline for the scheme, which allows investors access to ETFs cross-listed between the Singapore, Shenzhen and Shanghai bourses.

But while only seven ETFs have been launched on the scheme up to end-November, including partnerships between UOB Asset Management and Ping An Fund Management, and CSOP Asset Management and PineBridge Investments, a turnaround could be on the cards.

Earlier this month, the Monetary Authority of Singapore said it was in discussions with its Chinese counterpart to expand the number of ETFs on the cross-listing scheme.

This article was previously published by Ignites Asia, a title owned by the FT Group.

Russell Wang, head of securitised products for global markets at the Singapore Exchange, said the expectation of further government reforms and a rebound in China’s onshore markets meant ETF issuers were now preparing more products to be rolled out next year.

“Before September, weak investor sentiment towards Chinese equities slowed down developments in the pipeline as issuers were less certain about demand for new ETF listings,” said Wang.

But since the Chinese stock market rallied in October, investors had been getting back into the market, showing greater appetite for investing offshore, and issuers were responding and preparing to meet this change in demand, Wang said.

Wang now expects three to four new ETFs to be added to the cross-link scheme in the first half of 2025.

This is in addition to a new emerging Asia ETF from Singapore’s Lion Global Investors and Shenzhen-based China Merchants Fund Management that will be listed on December 11.

Before the Lion Global and China Merchants ETF, the last fund to be launched as part of the scheme was a Phillip Capital and China Universal Asset Management ETF that was rolled out in March.

This boost in investor appetite has also translated to an uptick in flows for ETFs available on the Singapore-China link.

Assets in the scheme grew by S$24mn ($17.9mn) in September and October, accounting for nearly 80 per cent of total asset growth in the preceding 12 months, according to the SGX.

Chinese investors accounted for 70 per cent of total flows, indicating interest among onshore investors for Singapore-listed ETFs.

Wang expects that overall Chinese investor sentiment is likely to pick up if the Chinese government is more proactive in supporting the market in light of Donald Trump’s election victory in the US.

Wing Chan, head of manager research for Asia Pacific at Morningstar, said Chinese domestic investors still had untapped demand for wider offshore exposure, which the Singapore-China ETF link could provide.

Historically, much of the offshore access has been via Hong Kong channels and Hong Kong products, he said, but many of these actually still invest in Chinese assets.

In addition to market performance factors, misalignment between partner fund firms in the scheme, particularly around commercial terms, has been a key reason behind the heretofore slow uptake in the scheme.

“For many of the issuers, they have limited experience working on a partnership with a Chinese asset manager, and vice versa,” said SGX’s Wang.

The part that took up the most time was usually around the “bilateral discussion to agree on the commercial terms”, such as who would drive fundraising and flows, and the overall objective of the partnership, he noted.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.