Securities Times | ETF Inflows Continue with Active ETFs in the Offing

Exchange-traded funds (ETFs) continue to draw capital inflows, with market size reaching new highs, while an innovative product—active ETF—is poised to make its debut.

Over the past three months, total ETF units across the market rose by 412.5 billion, up 13.7%, bringing the latest total to more than 3.42 trillion units. Total assets in this regard climbed by RMB 197.9 billion, or 4.2%, to RMB 4.95 trillion. Market participants noted that the sustained inflow of over RMB 100 billion through ETFs is strong evidence of the medium- and long-term investment value of the A-share market.

On September 28 alone, equity ETFs across the market recorded net inflows of more than RMB 24.6 billion. Broad-based ETFs attracted nearly RMB 12 billion, while ETFs tracking the STAR 50 Index drew net inflows of more than RMB 4 billion.

A total of 316 new ETFs were listed this year, while preparations for active ETFs have also gathered momentum. On June 17, Wu Qing, Chairman of the China Securities Regulatory Commission (CSRC), called for backing for the roll-out of active ETFs on stock exchanges at the Lujiazui Forum, and the Shanghai and Shenzhen stock exchanges issued business guidelines in parallel. In July, the first batch of 18 active ETFs were formally submitted for approval. The products have reportedly undergone on-the-spot inspections ahead of listing, and fund managers, securities companies, banks, and other participants across the ETF ecosystem are actively gearing up for their debut. The products are now sprinting to the market.

Active ETFs allow fund managers to select stocks and manage portfolios actively in pursuit of returns that outperform their benchmarks. On top of that, they retain major advantages of ETFs, including efficient trading, transparent holdings, and low fees by and large, filling a gap in the market for exchange-traded actively managed equity instruments. At the institutional level, active ETFs must hold at least 30 stocks, with their top 10 holdings accounting for no more than 60% of the portfolio. They are expected to operate with measured, orderly portfolio adjustments and an emphasis on investment-style consistency. The first batch of products generally embrace conservative approaches featuring low turnover and broad diversification, spanning large-cap balanced, value, quality, and dividend strategies. This range is expected to better meet investors' diverse investment demand.