Cross-Border ETF

International Promotion-the Second Business Innovation of Fund

——Introduction to EFUND Hang Seng H-Share ETF

As a vitally important innovation in the asset management industry of China, EFUND Hang Seng H-Share ETF (H-Share ETF) was launched by the SSE and EFUND in 2012. This fund is the first cross-border ETF listed on the SSE and holds constituents of Hang Seng H-share Index, attempting to minimize the tracking error and deviation.

The innovations of H-Share ETF

The innovations of H-Share ETF include: Firstly, it links China’s mainland market with the Hong Kong market. For example, investors of the mainland can invest in Hong Kong indirectly and share the returns by investing in H-Share ETF. Secondly, it accepts full-cash substitution in terms of fund subscriptions and redemptions. In other words, investors can subscribe for this fund in cash and obtain cash after redemption. This solves the problem that investors of Mainland China cannot apply for in-kind creation and redemption because they cannot hold stocks of Hong Kong directly. Thirdly, fund managers will buy or sell stocks and settle the relevant cost on the basis of net redemptions after this fund finishes its settlement of subscriptions and redemptions. In the course of trading, program trading will be executed so that the trading price is close to the closing price. This solves the problem of odd shares in the basket of the component shares, saves the expenditure of stamp duty, facilitates the risk hedging and reduces the discount or premium ratio.

The comparison of H-Share ETF and onshore stock index ETF

Fund Name H-Share ETF Onshore stock index ETF
Index Offshore, Hang Seng H-Share Index Onshore, stock index of SSE or SZSE.
Subscription Mode Unit subscription, full of cash of substitution. Unit subscription,in-kind subscription or in-kind subscription + cash of substitution.
Units subscribed for on Day T can be sold on Day T+2. Units subscribed for on Day T can be sold on Day T (T+2 for cross-market ETF listed on SZSE).
Redemption Unit redemption,full of cash of substitution. Unit redemption,in-kind redemption or in-kind redemption + cash of substitution.
Mode Units bought on Day T can be redeemed on Day T. Units bought on Day T can be redeemed on Day T.

The liquidity of H-Share ETF


H-Share ETF was launched on August 9th, 2012. H-Share ETF and its feeder fund had a size of 4.839 billion RMB at the time of inception, ranking first among all other similar products launched during the same period. H-Share ETF got listed on October 22nd, 2012 and received popular recognition quickly. From the day of listing to January 15th, 2013, H-Share ETF had a daily average trading volume of over 20 million RMB and a daily average turnover of approximately 2.46%, ranking the tenth and the sixth respectively among all ETFs. In terms of the discount or premium ratio, from November 9th, 2012(the day on which H-Share ETF met the requirement of fund contract) to January 15th, 2013, the performance of H-Share ETF was better than Hang Seng ETF.


Note: Wind Database, Nov. 9th, 2012 to Jan. 15th, 2013.

The performance of H-Share ETF

In terms of the growth rate of NAV, H-Share ETF exceeded Hang Seng ETF either since the inception day or since the day of listing of H-Share ETF. In terms of tracking error and deviation, from November 9th, 2012(the day on which H-Share ETF met the requirement of fund contract) to January 15th, 2013, the annualized tracking error and the average absolute value of daily deviation were 1.09% and 0.05% respectively, both of which were lower than Hang Seng ETF, demonstrating that H-Share ETF was tracing H-Share index closely.

The investment operation of H-Share ETF and Hang Seng ETF

Fund Name H-Share ETF Hang Seng ETF
Growth rate of NAV since the inception day 10.61% 6.28%
Growth rate of NAV since the listing day 8.45% 5.27%
Annualized tracking error 1.09% 2.24%
Average absolute value of daily deviation 0.05% 0.12%



Note: Wind Database and TX Database, Nov. 9th, 2012 to Jan. 15th, 2013.