Biaozhi SSE 50ETF

Introduction

CHINA UNION ETF50 is an Exchange-Traded Fund (ETF) managed and issued by China Union Securities Asset Management Co., Ltd. (China Union). The ETF operates on the Shanghai Stock Exchange, in the Shares Market (SSE) and is comprised of the 50 most liquid stocks listed in the index. The ETF’s goal is to replicate the performance of the China Securities 50 index, offering investors an opportunity to purchase a portfolio that reflects the price history of the index without having to directly invest in the index’s individual stocks.

Background

In 2006, China Union Securities Asset Management Co., Ltd. established the ETF tracking the performance of the tri-tendra (Shanghai Stock Exchange 50 Index: SSE50). This was the first Exchange Traded Fund to be traded in the Shanghai Stock Exchange. The ETF was designed as a passive investment mechanism to mimic the returns of the S&P Shanghai 50 Exchange Index - also known as the SSE50 - which is composed of the 50 largest and most liquid stocks listed in the SSE. The China Union ETF 50 allows investors to trade the components of the index in a combined, single securities package, under the stock code 510900.

Objective

The primary objective of the China Union ETF50 is to replicate the performance of the Shanghai Stock Exchange 50 Index while minimizing the tracking error. Tracking error is the difference between the ETF’s performance and the performance of the underlying index, based on the characteristics of the ETF. The ETF has a .097% tracking error, which is one of the lowest of its kind.

Portfolio Structure

The China Union ETF 50 comprises the 50 stocks listed in the SSE50, weighted according to their float-adjusted market capitalization. This allocation allows the ETF to closely follow the performance of the index. The sectors represented are Bank (23.7%), Industrial (19.4%), Real Estate (17.9%), IT Companies (17.3%) and Others (21.7%). The top ten stocks are Chinamobile Ltd. (5.8%), Ping An Insurance (5.6%), Kweichow Moutai Co. LTD. (3.6%), China Evergrande Group (3.2%), China Merchants Bank (2.9%), Alibaba Group Holding Ltd. (2.6%), China Baoshan Iron & Steel Co. (2.2%), Country Garden Holdings Co. (2.0%), SAIC Motor Co. LTD. (1.9), and CITIC Securities (1.9%).

Risk and Return

The China Union ETF50 has a Sharpe ratio of 0.6, indicating a potential for average returns, with a moderate level of risk. The ETF is also generally seen as a passive investment vehicle, with long-term returns closely related to the movements of the underlying index. The China Union ETF 50 tracks the SSE50 closely, so the ETF’s return is closely correlated to that of the index. As with all investments, there is no guarantee of positive returns.

Costs and Fees

The China Union ETF 50 has 0.5% management fee. This is one of the lowest fee structures for an ETF of its kind. Also, the China Union ETF50 does not have a transaction fee when buying or selling the fund. This further lowers the cost of investing in the ETF.

Conclusion

The China Union ETF 50 is an Exchange-Traded Fund (ETF) focusing on the Shanghai Stock Exchange 50 Index (SSE50). The ETF offers investors an opportunity to buy a single security that tracks the performance of the index, while minimizing the tracking error. The ETF is suitable for investors who want to gain exposure to a broad basket of Chinese stocks with a lower cost and moderate level of risk.

The Shanghai-Hong Kong Stock Connect, adopted in 2014, allows the investing of financial assets across the two markets without investors having to move their money physically, and offers a degree of convenience that has been welcomed by consumers. The most commonly traded asset on the Stock Connect is the CSOP S&P500A China A-share ETF, or also known as the SSE50 ETF.

The SSE50 ETF is designed to mimic the performance of the S&P 500® A-Share USD TR Index. SSE50 currently contains 50 of the largest and most liquid companies in the A-share market and is therefore considered to be more representative of the Chinese equity market. As such, the SSE50 ETF provides investors with a unique opportunity to access Chinese markets without the need for individual stock selection and the added costs associated with it.

The SSE50 ETF has become a popular investment tool because of its low cost structure and liquidity. The ETF offers investors a low-cost way to invest in the Chinese stock market, as the annual expense ratio of this ETF is only 0.60%, significantly lower than that of other ETFs. Additionally, its liquidity makes it easy for investors to quickly buy and sell shares without encountering significant price volatility.

Apart from lower costs and higher liquidity, the SSE50 ETF also has advantages such as diversification and neutrality. The SSE50 ETF offers investors exposure to the entire Chinese equity market, rather than just one sector or company, thus reducing portfolio risk. Also, since the SSE50 ETF tracks an index, it maintains a neutral stance, meaning it avoids actively taking positions in trades and investments. This is beneficial to investors since the ETF is not susceptible to any market risks associated with individual sectors or stocks.

In conclusion, the CSOP S&P500A China A-share ETF, or the SSE50 ETF, is an excellent way for investors to gain exposure to the Chinese equity market. With the advantages of low costs, wide diversification, good liquidity and neutrality, the SSE50 ETF has become a popular investing tool among investors.