(Reuters) – European fund manager Amundi is planning to launch an ETF for investors looking to gain exposure to emerging markets, excluding China, amid unfolding regulatory crackdowns and slowing growth in the world’s second-largest economy.
Global investors have been rattled by a flurry of new rules by Chinese regulators that have targeted sectors ranging from technology to private tutoring, while wiping out billions of dollars from their holdings.
“Investors are looking to be more precise in how they allocate given the large weighting of China in the broad EM indices,” said Ashley Fagan, global head of ETF, indexing and smart beta strategic clients at Amundi.
Chinese stocks constitute a third of MSCI’s Emerging Markets Index, recent data https://bit.ly/2YKuVZM showed.
“We are due to launch an ETF on EM ex-China in the coming weeks and it was co-developed with a client for this very reason,” Fagan told the Reuters Global Markets Forum.
Big international investors have been divergent in their positions on China.
Billionaire George Soros and ARK Invest’s Cathie Wood have warned against holding assets in the country, while others such as BlackRock and Ray Dalio, founder of giant hedge fund Bridgewater Associates, remain optimistic.
Outside China, Amundi – which managed about 1.79 trillion euros ($2.07 trillion) in assets as of June 30 – is also seeing investors cut their exposure to U.S. equity benchmarks such as the S&P500, shifting instead to stocks with strong fundamentals as well as those in the financial sector.
Graphic: Quality, Financial stocks and the S&P 500 https://fingfx.thomsonreuters.com/gfx/mkt/lbvgnoowapq/Pasted%20image%201634132892721.png
There has also been strong interest from institutional investors in ETFs focusing on Environmental, Social, and Corporate Governance (ESG) measures, with ESG accounting for half of Amundi’s total net fixed income inflows in 2021’s first nine months, or 14 billion euros.
“Any new product launches are viewed first through an ESG lens to see if we can launch it as a sustainable fund,” Fagan said. “Then, we work with index providers to qualify existing indices or develop unique customized approaches to meet client needs.”
($1 = 0.8664 euros)
(This interview was conducted in the Reuters Global Markets Forum, a chat room hosted on the Refinitiv Messenger platform. Sign up here to join GMF: https://refini.tv/33uoFoQ)); Reporting by Aaron Saldanha, Supriya Rangarajan and Lisa Mattackal in Bengaluru; Editing by Sweta Singh and Anil D’Silva)