Market Access STOXX China A Minimum Variance Index
UCITS ETF (Ticker M9SV)
Chinese equity exposure with reduced volatility
For professional investors only. Capital at risk

Background

The Market Access STOXX China A Minimum Variance Index UCITS ETF (M9SV) was first listed in Europe in June 2018 and cross listed on London Stock Exchange in April 2020.

The ETF tracks the performance of the Stoxx® China A 900 Minimum Variance Unconstrained AM (Accessible Market) Index ( China A Minimum Variance Index).

It is a CNY denominated index of onshore-listed China A shares that selects its constituents from the STOXX China A 900 Index with the aim of reducing volatility.

The unique feature of the Unconstrained methodology is that the index minimises volatility but is not restricted to follow its benchmark too closely. Unlike other low volatility or minimum variance indices, whose compositions are typically only allowed to differ from their benchmark by up to 5% or 10%. Such constrained indices only provide a tilt towards the low volatility or minimum variance factor, whereas the Unconstrained index provides undiluted minimum variance exposure.

The China A Minimum Variance Index is calculated on a net total return basis, meaning that it factors in dividends paid by index constituents net of any applicable withholding tax.

Why China?

  • Second largest economy in the world, growing at an average rate of 9% over the twenty years to 20201
  • A growing domestic consumer base, which is very tech savvy and tuned into the latest consumer trends
  • In 2000, China’s middle class amounted to just 3% of its population. By 2018, this was over 50% (707 million people)2
  • Economic transformation in China is seeing an ongoing shift from industry to services, and also from construction and related sectors to higher end manufacturing subsectors like car and train production and computer and telecommunications equipment
  • In 2022, expectations are for monetary loosening in China in contrast to the US, UK and other major western economies where central banks have started or are expected to start raising interest rates
China’s economic rebalancing creates significant opportunities

Source: 1 The World Bank IBRD IDA Data, 2 Center for Strategic and International Studies “How well-off is China’s middle class?”, September 2021

Why a minimum variance approach to investing in Chinese equities?

China presents a potentially significant investment opportunity, but has been heavily under-represented in many western portfolios as investors are wary of drawdown risks.

Using mean variance, the optimal portfolio weights are selected by minimising the volatility of individual stocks and correlations with other constituents. A minimum variance portfolio is therefore the portfolio with the lowest overall risk and possibility of drawdowns.

The STOXX® China A 900 Minimum Variance Unconstrained AM Index was developed to provide a minimum variance portfolio of China A Shares with the lowest overall volatility.

The STOXX® China A 900 Minimum Variance Unconstrained AM Index is not an index that aims to select low volatility stocks. Its aim is to minimise the overall portfolio volatility at index level. The process typically favours low risk stocks and sectors, therefore capturing the low volatility factor.

Source: China Post Global (UK) Ltd and Bloomberg, data as at 30 June 2022. Past performance should not be used as an indicator of future performance

Performance

Source: China Post Global (UK) Ltd and Bloomberg, as at 30 June 2022. Past performance should not be used as an indicator of future performance

Source: China Post Global (UK) Ltd and Bloomberg, as at 30 June 2022. Past performance should not be used as an indicator of future performance

5 Year returns to 30 June 2022 (in GBP)

STOXX® China A 900 MV Unconstrained AM (SA9CUNAC) CSI 300 (CSIN0300) MSCI China A Onshore (M7CN1A) FTSE China A50 (XINA50NC)
Period return 37.35% 45.35% 36.69% 58.73%
Annualised return 6.55% 7.76% 6.44% 9.67%
Annualised volatility 16.57% 21.17% 21.51% 21.58%
Maximum drawdown 23.26% 30.03% 36.55% 27.26%
Sharpe ratio 0.37 0.35 0.28 0.43

Source: China Post Global (UK) Ltd and Bloomberg, as at 30 June 2022. SONIA interest rate benchmark (SONIO/N index) used to calculate Sharpe ratios. Past performance should not be used as an indicator of future performance

Discrete annual performance to 30 June 2022 (in GBP)

Index June 17 to 18 June 18 to 19 June 19 to 20 June 20 to 21 June 21 to 22
STOXX® China A 900 MV Unconstrained AM (SA9CUNAC) 3.57% 3.82% 3.41% 21.17% -5.74%
CSI 300 (CSIN0300) -2.39% 11.25% 11.05% 27.49% -12.58%
MSCI China A Onshore (M7CN1A) -12.23% 9.23% 15.55% 28.06% -10.91%
FTSE China A50 (XINA50NC) 3.60% 20.45% 5.29% 27.71% -12.53%
FTSE All-Share (ASXTR) 9.02% 0.57% -12.99% 21.45% 1.64%
S&P 500 (SPTR500N) 13.71% 9.75% 6.87% 40.14% -11.01%
MSCI Emerging Markets (NDUEEGF) 8.20% 1.21% -3.39% 40.90% -25.28%

Source: China Post Global (UK) Ltd and Bloomberg. Past performance should not be used as an indicator of future performance

Market drawdowns: Performance of Stoxx® China A 900 Minimum Variance Unconstrained AM Index (in GBP)

Drawdown Period STOXX® China A 900 MV Unconstrained AM CSI 300 MSCI China A Onshore FTSE China A50
January 2018 to February 2019 23.26% 30.03% 35.19% 30.95%
Reason for market drawdown - Slowing economic growth and US trade tariffs
 
January 2021 to June 2022 12.30% 28.56% 26.59% 30.95%
Reason for market drawdown - Technology crackdown, real estate crisis and Covid 19 lockdowns

Source: China Post Global (UK) Ltd and Bloomberg. Past performance should not be used as an indicator of future performance

China A Minimum Variance Index - Top 10 holdings (as at 30 June 2022)

Name Industry Weight
Bank of China Ltd Banks 5.60%
China United Network Communications Telecommunications 5.57%
Industrial & Commercial Bank of China Banks 4.03%
Agricultural Bank of China Ltd Banks 4.01%
China Yangtze Power Co Ltd Utilities 3.29%
China Construction Bank Corp Banks 2.86%
Kweichow Moutai Co Ltd Food, Beverage and Tobacco 2.84%
China Petroleum & Chemical Corp Energy 2.61%
Foshan Haitian Flavouring & Food Co Food, Beverage and Tobacco 2.25%
Bank of Communications Co Ltd Banks 2.22%

Source: Stoxx

China A Minimum Variance Index constituents and key ratios (at 30 June 2022)

Number of constituents 137
P/E ratio 17.01
Dividend yield (net) 2.85%
Debt/Equity 1.07
Price/Book ratio 2.78

Source: Stoxx and Bloomberg

Source: STOXX, Bloomberg, China Post Global (UK) Ltd at 30 June 2022, using ICB Supersector classifications

How to invest

Please contact your wealth management adviser or stockbroker. The ETF is also available through leading online investment platforms. The ETF is ISA and SIPP eligible.

Please contact us if there any issues with trading the ETF through a platform and we will gladly try to assist.

To find out more, please click here for fund information and literature.

Please read the prospectus, including the risk factors, and KIID before making an investment in the ETF.

Click here to find out more about Market Access and China Post Global.

key features

Legal form UCITS ETF
ISIN LU1750178011
TER / OCF 0.45%
Domicile Luxembourg
Management Company FundRock Management Company S.A.
Investment Manager China Post Global (UK) Limited
Custodian and Administrator RBC Investor Services Bank S.A.
Replication Physical
ISA / SIPP eligible Yes
UK Reporting Fund Status Yes