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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
said Thursday.
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.