One interesting part of this dual counter trading arrangement model is that it does allow inter-counter transfer. That means investors can buy fund units of CSOP A50 ETF traded in HKD (Stock Code: 2822.hk), convert them into RMB-denominated fund units via CCASS (Central Clearing and Settlement System) and then sell them on RMB counter (Stock Code: 82822.hk) or vice versa.
CSOP fund custodian for HKD trading counter is HongKong and Shanghai Banking Corporation (HSBC Stock Codes: 005.hk in Hong Kong, HBC in New York, HSBA in London). Registrar and trustee are HSBC Institutional Trust Services (Asia) Ltd. Securities market makers are Credit Suisse Securities (H.K) Ltd, Bluefin H.K Limited, Deutsche Securities Asia Ltd, UBS Securities H.K Ltd and Optiver Trading H.K. Ltd. Our stock analysis of CSOP FTSE A50 (Stock Code 2822.hk) is as follow:
CSOP FTSE A50 China ETF Analysis:
(1) The same as iShares A50 (Stock Code: 2823.hk), underlying asset of CSOP FTSE A50 (Stock Code 2822.hk) also intends to track FTSE A50 China Index so as to replicate passively its index performance for the largest 50 publicly-traded liquid A-shares (calculated by free-float-weighted total market capitalization) which are listed on Shenzhen Stock Exchange (SZSE) as well as Shanghai Stock Exchange (SSE) in People's Republic of China (PRC) by using a full replication strategy.
Here is the FTSE China A50 Index Chart against Shanghai Composite and Shenzhen Composite Indexes:
Source of CSOP ETF IPO Prospectus: CSOP A50 ETF (Stock Codes: 2822.hk for HKD counter and 82822.hk for RMB counter)
(2) Unlike iShares ETF, however, this physical CSOP ETF does directly invest in or hold A-Shares via RQFII (Renminbi Qualified Foreign Institutional Investor) quota of the fund manager. Available RQFII quota for this CSOP ETF is totally RMB 10 billion as of November 2, 2012.
(3) The sub-fund (Stock Code: 2822.hk) is cataloged under the whole CSOP ETF Series. Total expense ratio (TER) is estimated as 1.15% of NAV (Net Asset Value) per annum by the fund manager. Its ongoing fee structure consists of management fee, registrar, trustee and custodian fees etc. By definition, estimated total expense ratio (ETER) is calculated as the sum of estimated direct charges to ETF that is expressed in percentage NAV without including any anticipated tracking error.
(4) ETF Dividend Policy: This index fund may distribute its net income (after costs and fees) annually (typically in December) to unitholders. Dividends for all fund units (no matter traded in RMB or HKD counter) will only be in Renminbi.
(5) The same as iShares A50 ETF, this fund (Stock Code: 2822.hk) is subject also to concentration risk, passive investment risk, taxation risk, tracking error risk etc. In addition, it contains a special dual counter trading risk, where its share market price may deviate significantly because of various factors like demand and supply in each currency counter, liquidity in each market, as well as the forex (foreign exchange) rate between HKD and RMB (either in offshore or onshore market). Due to this dual counter trading risk, investors may then significantly receive less or pay more if they sell or buy fund units traded in RMB on HKEx than those traded in HKD or vice versa. As a result, investors should not expect receiving the same as if they did multiply unit share price simply by the prevailing forex rate.
However, one key advantage of this CSOP FTSE A50 (Stock Code 2822.hk) over iShares FTSE A50 (Stock Code: 2823.hk) is that it is a physical ETF which does directly invest in or hold A-Shares. Therefore it contains no risks relating to synthetical replication or CAAPs (China A-Share Access Products) at all.
Our Analysis Report Conclusion:
Owing to the similarity of this CSOP FTSE A50 ETF (Stock Code 2822.hk) with iShares FTSE A50 ETF (Stock Code: 2823.hk), they should share the common analysis report we published before. While you can easily find out the details from above link, so we do not duplicate them here.
With this new CSOP FTSE A50 China ETF (Stock Codes: 2822.hk for HKD counter and 82822.hk for RMB counter), there are already many competitors for similar China index funds, such as SSE 50 Index Fund (Stock Code: 3024.hk), DBX CSI 300 Index Fund (Stock Code: 3049.hk) or the above-mentioned iShares FTSE A50 China ETF (Stock Code: 2823.hk) listed on HKEx, as well as the actively-managed Morgan Stanley China A-Share Index Fund (Tracking Code: CAF) listed in the U.S. This new CSOP FTSE A50 China ETF is another good choice for investors if they are really long-term bullish towards emerging markets, particularly China financial business sector. Since this fund is truly competitive, its daily trading volume has already started to hike and we expect it will continue to increase as it goes more popular in the market.
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Additional Stock Analysis For China Funds:
Reports Summary: Our Full Analysis Table For Funds