The highly anticipated first batch of 10 exchange-traded funds (ETFs) tracking the China Securities Index (CSI) A500 Index debuted on Tuesday on the Chinese mainland bourses.
Approved by the Chinese security regulator in early September, the 10 ETFs have raised a total of approximately 20 billion yuan, or 2.81 billion U.S. dollars.
The CSI A500 ETFs run by China Southern Fund, Invesco Great Wall Fund, Harvest Fund, Yinhua Fund, and Guotai Asset Management are listed on the Shenzhen Stock Exchange. Meanwhile, Huatai-PineBridge Investments, J.P. Morgan Asset Management, Fullgoal Fund, China Merchants Fund, and Taikang Asset Management have their ETFs listed on the Shanghai Stock Exchange.
According to disclosed information, a variety of institutional investors - including brokerages, insurance funds, private equity firms, and foreign banks—are among the primary holders of the CSI A500 ETFs.
Analysts note that the introduction of the CSI A500 ETFs serves two significant purposes. First, it provides investors with opportunities to capitalize on the "new quality productive forces." Second, it directs more capital into those emerging and tech-heavy sectors, enhancing the capital market's ability to support the real economy.
Formally released on Sept 23, the CSI A500 index tracks 500 securities with large market values to reflect the overall stock performance of the listed companies most representative of China's various industries.
Index funds represented by ETFs have developed rapidly in China. The domestic ETF market size reached 2.47 trillion yuan (about 350 billion U.S. dollars) by the end of June 2024, according to reports released by Shanghai and Shenzhen bourses.
First batch of 10 CSI A500 ETFs hit market
Mergers, acquisitions, and reorganizations in China's A-share market have picked up markedly since the start of the year, with deals disclosed in the first quarter up over 80 percent year on year, led by strong momentum in hard-tech sectors.
Data from Wind Information, a China financial data provider, showed that by Tuesday, listed companies had announced 829 merger, acquisition, and reorganization deals, with 224 on the ChiNext board and 94 on the STAR Market. By sector, "hard technology" sectors, represented by semi-conductor and smart manufacturing, have emerged as the most active areas.
"Hard-tech sectors typically feature rapid technological iteration, heavy research and development investment and long industrial chains, with significant economies of scale. Given these features, industrial mergers, acquisitions, and reorganizations have been a key tool for hard-tech companies to strengthen supply chain resilience and competitiveness. In addition, China's related policies, dubbed 'Six Measures for Mergers and Acquisitions,' explicitly support listed companies in carrying out mergers, acquisitions, and reorganizations around strategic emerging industries and future industries, while moderately increasing regulatory tolerance for unprofitable assets. This has created more favorable institutional conditions and a better market environment for listed companies in the hard-tech sectors to accelerate industrial upgrading and strengthen independent innovation," said Chen Jie, head of Mergers and Acquisitions Group at the investment banking division of China International Capital Corporation.
Chen also noted that the surge in mergers, acquisitions, and reorganizations has been reshaping valuation dynamics in the A-share market. As integration and synergies take time to materialize, investors are increasingly shifting their focus from short-term sentiment to long-term value based on business logic. At the same time, sustained mergers and acquisitions activity is expected to support the revaluation of leading companies.
"Through consolidation and expansion, leading A-share firms are likely to see their core competitiveness and long-term growth prospects become more evident. This will help the market better recognize their intrinsic value, offering higher valuation, and contribute to a more rational and mature valuation system overall," said Chen.
China's A-share sees mergers, acquisitions, reorganizations pick up,led by hard-tech sectors
