The FTSE China A50 Index (the Index) is one of the most recognised China A-share indices. Launched over 20 years ago, it comprises China’s 50 largest A-share companies listed on the Shanghai or Shenzhen stock exchanges. These 50 stocks represent about one-third of the entire A share market by weight.
Why China A shares?
The A share market is popular among investors seeking exposure to China’s domestic growth potential. A-share companies typically serve the domestic market and, as such, generate the bulk of their revenue from Chinese consumers. This makes them relatively better positioned to weather ongoing US-China trade tensions, and they are better placed to benefit from China’s stimulus plans.
Eight benefits of the UOBAM FTSE China A50 Index ETF (SGX: JK8)
1. Exposure to big name stocks
The UOBAM FTSE China A50 Index (SGX: JK8) (the Fund) offers investors access to some of the most well-established stocks in the China A-share market. These include well-known names such as liquor giant Kweichow Moutai, battery maker Contemporary Amperex Technology (CATL), and the Industrial & Commercial Bank of China (ICBC).
These companies reflect some of the most important themes within China’s modern economy, including decarbonisation, financial services and domestic consumption (See Fig. 1).
2. Potential to outperform in market rallies
China’s large-cap stocks have outperformed their smaller-cap peers during recent market rallies. This is because popular indices and ETFs that benefit the most from foreign investor flows tend to feature large-cap stocks.
As a result, in 2024, when the Chinese market rallied on the back of stimulus measures, large-cap indices like the FTSE China A50 Index outperformed all-cap indices such as the FTSE China A All Cap (see Fig. 2).
3. Potential resilience in down markets
Large-cap stocks also tend to be more stable, given the companies’ strong brand presence and significant market share, especially during times of economic uncertainty. This is because investors are more inclined to hold on to such stocks for their dividend payments and good fundamentals, despite downward market pressures (see Fig. 3).
4. Denominated in Singapore dollars
The Fund is listed on the Singapore Exchange(SGX) and offers trading in Singapore dollars (SGD). This is particularly appealing to Singaporean investors who do not want to deal with currency exchange issues. The majority of China-focused ETFs are listed in Hong Kong or the US and offered in HK dollars or US dollars, which is inconvenient for investors whose wealth and portfolios are SGD-based.
Singaporeans can also buy into the Fund using their SRS funds. There are no Customer Account Review (CAR) requirements as the Fund is an Excluded Investment Product (EIP).
5. Diversification across key industries
China’s economy has undergone significant transformation over the past 20 years, and the FTSE China A50 Index has evolved in tandem. The country’s focus on innovation and consumption-led growth has increased the weighting of consumer, technology and healthcare companies within the Index.
Such companies now make up 37% of the Index, three times more than in 2015. In contrast, financials, which made up more than 60% of the Index a decade ago, now occupy just a third of the index.
By investing in the Fund rather than individual stocks, investors ensure that they are in lockstep with the changing face of China’s economy (see Fig. 4).
6. Regular dividend payments
Another benefit of the Index’s large-cap exposure is the potential for attractive income. Large-cap companies tend to have more room to pay dividends compared to growth-focused smaller caps. The average dividend yield for the FTSE China A50 index is 3.5% compared to the all-caps average dividend yield of 2.4%1. The Fund aims to provide annual distributions2, making it an appealing choice for income-seeking investors.
7. Low cost and transparent
The Fund offers ongoing exposure to China’s biggest stocks via a single vehicle, based on a quarterly rebalancing cycle. This means that if a stock shrinks in size and is no longer a Top 50 stock, it will be automatically replaced without investors needing to keep track. Additionally, to prevent excessive turnover, a buffer zone is in place around the 50th-ranked stock.
8. No minimum board lot size
The Fund, as a Singapore-listed ETF, can be bought from just one unit, in contrast to most Hong Kong-listed ETFs, which usually require a minimum lot size of 100 units. This makes it easy for investors to tactically allocate to the ETF as part of a well-diversified portfolio.
Important Notice and Disclaimers
This document is for general information only. It does not constitute an offer or solicitation to deal in units (“Units”) in the UOBAM FTSE China A50 Index ETF (“Fund”) or investment advice or recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it.
The information contained in this document, including any data, projections and underlying assumptions, are based upon certain assumptions, management forecasts and analysis of information available and reflects prevailing conditions and UOB Asset Management Ltd’s (“UOBAM”) views as of the date of the document, all of which are subject to change at any time without notice. In preparing this document, UOBAM has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by UOBAM. While the information provided herein is believed to be reliable, UOBAM makes no representation or warranty, whether express or implied, and accepts no responsibility or liability for its completeness or accuracy. Nothing in this document shall, under any circumstances, constitute a continuing representation or give rise to any implication that there has not been or there will not be any change affecting the Fund. No representation or promise as to the performance of the Fund or the return on your investment is made. Past performance of the Fund or UOBAM and any past performance or prediction, projection or forecast of the economic trends or securities market are not necessarily indicative of the future or likely performance of the Fund or UOBAM. The value of Units and the income from them, if any, may fall as well as rise, and is likely to have high volatility due to the investment policies and/or portfolio management techniques employed by the Fund. Investments in Units involve risks, including the possible loss of the principal amount invested, and are not obligations of, deposits in, or guaranteed or insured by United Overseas BankLimited (“UOB”), UOBAM, or any of their subsidiary, associate or affiliate (“UOB Group”) or distributors of the Fund. The Fund may use or invest in financial derivative instruments, and you should be aware of the risks associated with investments in financial derivative instruments, which are described in the Fund’s prospectus. The UOB Group may have interests in the Units and may also perform or seek to perform brokering and other investment or securities-related services for the Fund.
Investors should note that the Fund is not like a conventional unit trust in that an investor cannot redeem his Units directly with UOBAM and can only do so through the participating dealers, either directly or through a stockbroker, if his redemption amount satisfies a prescribed minimum that will be comparatively larger than that required for redemptions of units in a conventional unit trust. The list of participating dealers can be found at www.uobam.com.sg. An investor may therefore only be able to realise the value of his Units by selling the Units on the Singapore Exchange Limited (“SGX”). Investors should also note that any listing and quotation of Units on the SGX does not guarantee a liquid market for the Units. An investment in unit trusts is subject to investment risks and foreign exchange risks, including the possible loss of the principal amount invested. Investors should read the Fund’s prospectus, which is available and may be obtained from UOBAM or any of its appointed agents or distributors, before deciding whether to subscribe for or purchase any Units. You may wish to seek advice from a financial adviser before making a commitment to invest in any Units, and in the event that you choose not to do so, you should consider carefully whether the Fund is suitable for you.
The UOBAM FTSE China A50 Index ETF has been developed solely by UOBAM. The UOBAM FTSE China A50 Index ETF is not in any way connected to or sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the FTSE China A50 Index vest in the relevant LSE Group company, which owns the FTSE China A50 Index. “FTSE®” is a trademark of the relevant LSE Group company and is used by any other LSE Group company under license. The FTSE China A50 Index is calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the FTSE China A50 Index or (b) investment in or operation of the UOBAM FTSE China A50 Index ETF. The LSE Group makes no claim, prediction, warranty or representation either as to the results to be obtained from the UOBAM FTSE China A50 Index ETF or the suitability of the FTSE China A50 Index for the purpose to which it is being put by UOBAM.
This publication has not been reviewed by the Monetary Authority of Singapore.
UOB Asset Management Ltd. Company Reg. No. 198600120Z
