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South Korean firms are seeking to expand their investments in Chinese equities
by putting their money into exchange-traded funds (ETFs), financial sources here
In a bid to increase exposure to China's blue-chip firms, South Korean institutional investors that are qualified to buy mainland Chinese stocks are considering buying ETFs listed on the markets in Shanghai and Shenzhen, said a financial official familiar with the matter.
Another source said South Korea's investment firms, including leading mutual fund manager Mirae Asset Financial Group, are also looking into the option in a bid to diversify its portfolio.
In March, Chinese authorities approved the launch of the country's first ETFs that track stocks listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange.
ETFs are securities tracking an index while having the flexibility of trading like a stock. Similar to an index fund, an ETF represents a basket of stocks that reflect an index. They are often preferred by institutional investors, as they give investors a more liquid and risk-hedging tool.
The move is seen to allow investors who are participating in China's two stock markets perform in accordance with the growth of the world's No. 2 economy.
South Korea's central Bank of Korea said this week that it has started investing in the Chinese stock markets with qualified foreign institutional investor (QFII) status.
The largest South Korean institutional investor, the National Pension Service (NPS), and the sovereign wealth fund Korea Investment Corp. are also set to invest in China after receiving the QFII status earlier this year.
Shares in mainland China-based companies that trade on the Chinese stock exchanges, such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange, are generally available for trading by only mainland citizens.
Foreign investment in
those shares, called A-shares, is only allowed through a tightly regulated
structure under the QFII system.
About a dozen of South Korean investment firms have been granted licenses to invest in the mainland Chinese stock market. Among them, eight are asset management firms, including Hanwha Investment & Securities, Mirae Asset Management and Samsung Asset Management.