Chinese Fund Giants Slash ETF Fees Amid Intense Market Competition

Major Chinese fund companies have announced a reduction in fees for a selection of equity exchange-traded funds (ETFs). This move intensifies the price war in the booming $400 billion ETF market.

What Happened: The fee cuts come a day after Wu Qing, China’s chief securities regulator, expressed support for index investment and fee reform in the fund industry. ETFs, which typically track an index and trade on exchanges, have seen significant growth this year as investors turn away from underperforming active fund managers, Reuters reported on Wednesday.

China Asset Management Co (ChinaAMC), leading the ETF market, announced it would reduce fees on eight ETF products, including the 160 billion yuan China SSE 50 ETF. The management fee will drop to 0.15% from 0.5%, and the custodian fee to 0.05% from 0.1%.

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Other fund companies such as E Fund Management, Huatai-PineBridge Fund Management, Harvest Fund Management, and HuaAn Fund Management have made similar announcements. This trend is expected to attract more capital into the market, with net inflows into China’s onshore ETFs surpassing 900 billion yuan this year, according to BNP Paribas.

Why It Matters: The fee reduction by major Chinese fund companies comes amid a backdrop of economic measures and market fluctuations. In October, investor sentiment was dampened when anticipated large-scale economic stimulus measures from Chinese authorities did not materialize. Despite signals of increased fiscal support, the absence of a substantial economic package left traders underwhelmed.

Furthermore, China’s decision to cut interest rates in late October led to a decline in several China-focused ETFs in the U.S. This move, aimed at stimulating economic growth, instead raised concerns among investors about its broader implications.

Meanwhile, U.S.-listed Chinese ETFs have been providing American investors exposure to Chinese equities, bonds, or a combination of both, while being traded on U.S. stock exchanges. These ETFs are a convenient way for investors to gain diversified exposure to China’s economic growth without the complexities of directly investing in foreign markets. According to Benzinga Pro, KraneShares CSI China Internet ETF KWEB, iShares China Large-Cap ETF FXI, Invesco Golden Dragon China ETF PGJ, and iShares MSCI China ETF MCHI are some of the popular names on the list.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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