New Chinese ETF Could Send Waves of Chinese Investors Into U.S. Stocks

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A Chinese investment management firm is about to launch China’s first U.S. S&P 500 exchange traded fund (ETF), for domestic Chinese investors.Due to past investment restrictions, this ETF is sure to be a goldmine for the firm as it suddenly opens up the U.S. stock market to Chinese savings.

Index Universe:

Bosera Asset Management, a Shenzhen, China-based firm with $30.8 billion under management, will add to the $1 trillion now indexed to the S&P 500 with its new ETF, S&P said in a statement on Thursday. The S&P 500 is the world’s most widely used index. The biggest ETF, the SPDR S&P 500 ETF (NYSEArca: SPY), had $70.23 billion in assets at the end of February, according to data from the National Stock Exchange.

“A lot of investors in the 500 come from outside the U.S., whether they use futures, domestically listed ETFs, U.S.-listed ETFs or other measures,” Alexander Matturri, executive managing director at S&P Indices, said in a telephone interview. “The liquidity builds on itself.”

Note that Bosera already has nearly $31 billion under management vs. $70 billion for the largest U.S.-based S&P 500 ETF. Given the massive glut of Chinese savings, plus the rapidly growing domestic wealth, it’s thus not inconceivable that one day a Chinese S&P 500 ETF could be as large as the SPDR U.S.-based ETF mentioned in the excerpt above. That means a lot of Chinese liquidity, pent up for many years, could start pouring into U.S. stocks as international investment opportunities are expanded for Chinese citizens.

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