Call it a market swap.
That’s the logic behind this week’s investment by Beijing’s China International Capital Corp. -- an investment bank known as the Goldman Sachs of China -- in Krane Funds Advisors LLC, a New York-based issuer of exchange-traded funds focused on the mainland. The Americans get better access to Chinese markets; the locals get a platform in the U.S. Everyone wins.
The $4.5 trillion global ETF market has China in its sights and local money managers want a piece of the action. HSBC Holdings Plc estimates that as much as $500 billion could flow into China over the next five to 10 years after MSCI Inc., one of the world’s biggest indexers and a benchmark provider for hundreds of ETFs, said last month that it would include the nation’s stocks in its gauges from May 2018.
Meanwhile, wealthy Chinese are starting to branch out and are looking for ways to invest abroad, even as capital controls in the nation limit outflows.
“China asset managers are looking to expand internationally,” said David Quah, the Hong Kong-based head of ETFs at Mirae Asset Global Investments, a unit of Mirae Asset Financial Group. “ETFs are a good way to penetrate the overseas market.”
M&A Action
CICC is not the only Chinese company with global ambitions in the ETF business. China Post Global, the international asset management unit of China Post & Capital Fund Management Co., acquired the European ETF business of Royal Bank of Scotland Group Plc in March. The company plans to expand and has three new funds in the pipeline, according to Danny Dolan, a managing director at the money manager.