Invesco’s new China ETFs offer synthetic structural advantages

Invesco is expanding its offering for investors wanting exposure to China by launching two ETFs, one focussed on the largest companies and the other on the mid-cap segment. The Invesco S&P China A 300 Swap UCITS ETF and Invesco S&P China A MidCap 500 Swap UCITS ETF both offer the potential structural advantages provided by the firm’s synthetic replication model.

Gary Buxton, Head of EMEA ETFs and Indexed Strategies at Invesco, said: “China already boasts the second-largest equity market in the world, and it’s increasingly diverse. Our ETFs aim to provide investors an opportunity to be more precise with their exposure. For example, if they wish to focus on companies driven by domestic consumption, they’re more likely to find them in the mid-cap space, whereas larger companies tend to have more international exposure.”

The Invesco S&P China A 300 Swap UCITS ETF aims to track the performance of an S&P index that comprises 300 of the largest stocks on the A-shares market, while the Invesco S&P China A MidCap 500 Swap UCITS ETF tracks an index comprised of the next-largest 500 stocks. Both indices focus only on the shares of companies incorporated in mainland China and traded in Renminbi on the Shanghai and Shenzhen stock exchanges. Unlike some competing benchmarks, both indices remove companies on the Office of Foreign Assets Control (“OFAC”) Sanctions List.

Each ETF will aim to achieve its investment objective by holding a basket of quality securities and engaging in swap contracts with one or more large investment banks. The securities are typically not the same as in the index but are expected to provide an investment return for the ETF. The swaps would normally be intended to provide closer, more consistent tracking of the index return.

Chris Mellor, Head of EMEA Equity and Commodity ETF Product Management at Invesco, said: “The dynamic of China’s onshore equity market can offer a structural advantage for synthetic replication. Quant desks and hedge funds running market-neutral strategies don’t have access to traditional methods for hedging the market risk, so they often use index derivatives written by banks. Our ETFs may sometimes benefit from favourable conditions in the swap markets, although the potential outperformance of the index will fluctuate and is not guaranteed.”

Michael Orzano, Senior Director of Global Equity Indices at S&P Dow Jones Indices said: “We are very pleased that Invesco has licensed the S&P China A 300 Index and S&P China A MidCap 500 Index for its new exchange-traded funds. We’re proud to offer independent and transparent indices to global market participants who are seeking targeted exposures to onshore Chinese equities. A-shares have grown in importance to international investors, and these indices have been designed to capture this important market segment.”

These two ETFs follow last year’s launches of the Invesco China All Shares Stock Connect UCITS ETF and the Invesco China Technology All Shares Stock Connect UCITS ETF. 

*GBP share class also available for both ETFs on LSE, while EUR (on Xetra and Borsa Italiana) and USD (on SIX Swiss Exchange) share classes are also being launched.

ENDS

Investment risks

The value of investments and any income will fluctuate (this may partly be the result of exchange-rate fluctuations) and investors may not get back the full amount invested.

As a large portion of the funds is invested in less developed countries, investors should be prepared to accept a higher degree of risk than for an ETF that invests only in developed markets.

The Funds’ ability to track the benchmark’s performance is reliant on the counterparties to continuously deliver the performance of the benchmark in line with the swap agreements and would also be affected by any spread between the pricing of the swaps and the pricing of the benchmark. The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.

The Funds might be concentrated in a specific region or sector or be exposed to a limited number of positions, which might result in greater fluctuations in the value of the Funds than for a fund that is more diversified.

The value of equities and equity-related securities can be affected by a number of factors including the activities and results of the issuer and general and regional economic and market conditions. This may result in fluctuations in the value of the Funds.

The funds might purchase securities that are not contained in the reference index and will enter into swap agreements to exchange the performance of those securities for the performance of the reference index.

The Funds’ performance may be adversely affected by variations in the exchange rates between the base currency of the Funds and the currencies to which the Funds are exposed.

Important information

This press release is intended for trade press use only. Please do not redistribute. All data is coming from Invesco as at 29 April 2022 unless otherwise stated.

For more information on our funds and the relevant risks, please refer to the share class-specific Key Investor Information Documents (available in local language), the Annual or Interim Reports , the Prospectus, and constituent documents, available from www.invesco.eu. A summary of investor rights is available in English from www.invescomanagementcompany.ie. The management company may terminate marketing arrangements. This document is marketing material and is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. This document should not be considered financial advice. Persons interested in acquiring the fund should inform themselves as to (i) the legal requirements in the countries of their nationality, residence, ordinary residence or domicile; (ii) any foreign exchange controls and (iii) any relevant tax consequences. For details on fees and other charges, please consult the prospectus, the KIID and the supplement of each product. UCITS ETF’s units / shares purchased on the secondary market cannot usually be sold directly back to UCITS ETF. Investors must buy and sell units / shares on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units / shares and may receive less than the current net asset value when selling them. For the full objectives and investment policy please consult the current prospectus.

The S&P China A 300 Index is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Invesco. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Invesco. The Invesco S&P China A 300 Swap UCITS ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P China A 300 Index.

S&P China A MidCap 500 Index is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Invesco. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Invesco. The Invesco S&P China A MidCap 500 Swap UCITS ETF  is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P China A MidCap 500 Index.

This document has been communicated by Invesco Investment Management Limited, Ground Floor, 2 Cumberland Place, Fenian Street, Dublin 2, Ireland.

Invesco

Jane Drew

jane.drew@invesco.com

Telephone +44 20 3370 1104

Citigate Dewe Rogerson

Hugh Fasken/ Borja Miquel/ Will Easton/ Saffron Wainwright

CDRETFInvesco@citigatedewerogerson.com

Telephone +44 20 7025 6400

About Invesco Ltd.
Invesco Ltd. is a global independent investment management firm dedicated to delivering an investment experience that helps people get more out of life. Our distinctive investment teams deliver a comprehensive range of active, passive and alternative investment capabilities. With offices in more than 20 countries, Invesco managed $1.6 trillion in assets on behalf of clients worldwide as of March 31, 2022. For more information, visit www.invesco.com.

The “S&P China A 300 Index” and “S&P China A MidCap 500 Index” are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and have been licensed for use by Invesco Ltd (“Invesco”).  S&P® and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Invesco.  Invesco S&P China A 300 Swap UCITS ETF and Invesco S&P China A MidCap 500 Swap UCITS ETF are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P China A 300 Index and S&P China A MidCap 500 Index.