Previously, investors in China were only able to access the United States stock market through ordinary Qualified Domestic Institutional Investor funds most of which are known to be cumbersome to trade with a time-consuming redemption process.
In that respect the Guotai NASDAQ-100 ETF significantly enhances investment efficiency for Chinese individual and institutional investors looking to purchase US securities, and is an important milestone for the Shanghai market especially as it aims for a wider international business role.
Since ETFs are traded on the secondary market prices are usually more transparent with low transaction costs and that provides an additional incentive to interested investors. They can now purchase shares traded on the NASDAQ-100 Index, including stocks in some of the world's most innovative high-tech companies such as Apple and Google, as if they were buying a primary common stock.
Commenting on the listing, NASDAQ OMX Vice President, Robert Hughes said "We applaud Guotai Asset Management for responding to increasing demand among all classes of investors in China for a cross-border ETF. The Guotai NASDAQ-100 ETF enables individual and institutional investors in China to access 100 of the world"s largest and fastest growing companies - including Baidu, Microsoft, Apple and Starbucks."
The NASDAQ-100 Index is regarded as the benchmark for indices worldwide and has accumulated a rise of about 164 percent during a ten-year period ending December 31st 2012, according to data compiled by Bloomberg. That is nearly four times the Shanghai Composite Index performance for the same period, underlining the massive potential for the linked performance of the Guotai NASDAQ-100 ETF.
The Fund commenced trading on Shanghai Stock Exchange on Wednesday May 15th and transaction volume for its first trading day surpassed 8.77 million shares indicating an immediate strong interest from investors.
John Jacobs, Vice CEO of NASDAQ OMX, stated that he expects other Chinese fund management companies to follow in the footsteps of Guotai and launch products that target other NASDAQ indices in the near future. Adding that the new listing is a significant move for the overall development of the ETF market in China.
The new ETF is the second among three main products launched by Guotai since the beginning of 2013. The government bond ETF it underwrote in March has impressively become the most traded ETF product on both Shanghai and Shenzhen Stock Exchange markets.
Founded 22 years ago, the Shanghai Stock Exchange relation with NASDAQ OMX dates back to 1995, a mere four years after its inception. Since then it has established numerous joint partnerships with 33 exchange markets around the world. Its first Memorandum of Understanding (MoU) with a foreign stock exchange was signed in 1992.
The introduction of the Guotai NASDAQ-100 Exchange Traded Fund undoubtedly aids Shanghai in its plan to push for a larger share of stock market activity on a global level. It also satisfies NASDAQ's China plans, while enhancing Guotai's status in the local market.
According to figures by global investment manager Black Rock, inflows into Chinese equity exchange products increased by 23.4 percent to $937.4 billion since May of last year.
