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Summary of ChinaAMC ETF Funds 2022 Semi-Annual Report

1. ChinaAMC Asia USD Investment Grade Bond ETF

Introduction:

• A passively managed ETF within the ChinaAMC Global ETF Series II.
• Tracks the Bloomberg Asia USD Investment Grade Bond Index.
• Uses representative sampling to invest at least 90% of assets in index bonds or related securities.

Performance:

• Registered substantial losses (-9.33% for HKD counter) during June 2022.
• Since inception, has shown mixed results with some periods of profit.

Assets:

• Primarily invested in listed bonds from Europe, Hong Kong, Macau, India, Indonesia, Korea, and Malaysia.
• Significant holdings include bonds from China-based companies.

2. ChinaAMC Hong Kong Banks ETF

Introduction:

• A passively managed ETF also part of ChinaAMC Global ETF Series II.
• Tracks the NASDAQ Hong Kong Banks Index.
• Primarily trades on the HKEX and uses full replication or representative sampling strategies.

Performance:

• Showed a 7.42% gain for the sub-period ending June 30, 2022.
• Performance somewhat offset underlying index gains.

Assets:

• Highest weighted stock is the China Construction Bank H-share.
• Significant exposure to banks like ICBC and HSBC.
• Majority of investments are in listed equity securities.

3. ChinaAMC Asia High Dividend ETF

Introduction:

• ETF tracking the NASDAQ Asia ex-Japan Dividend Achievers Total Return Index.
• Uses a passive replication strategy.

Performance:

• Registered an 8.37% gain for the sub-period, slightly exceeding the divisor index (-7.76%).

Assets:

• Exposed to highly non-regulated Chinese tech firms with high dividend policies.
• List focuses on growth sectors like hardware/software, telecom, retail/wholesale trade, and biotechnology.
• Mix has shifted post-January 2021.

4. ChinaAMC MSCI Japan Hedged to USD ETF

Introduction:

• Hedged exposure to Japanese stocks tracked via MSCI Japan 100 Index.
• Trade on HKEX.

Performance:

• Showed a 6.70% decrease during the sub-period, underperforming the hedged index.

Assets:

• Uses forwards to hedge currency exposure.
• Holdings are Japanese equities, including components from major Japanese corporations and REITs.
• 99% of assets are structured as equities.
• Registered June 2022 NAV was HK$13.69.

5. ChinaAMC MSCI Europe Quality Hedged to USD ETF

Introduction:

• Tracks Europe quality stocks using quality strategy defined by MSCI.
• Uses hedging to manage currency risk.

Performance:

• Showed a -16.81% return during the sub-period, underperforming the quality index.

Assets:

• Largely concentrated in Swiss, Swedish, United Kingdom, United States, and other sectors.
• High exposure to REITs, real estate, chemicals, and consumer staples.

6. ChinaAMC MSCI Asia Pacific Real Estate ETF

Introduction:

• ETF focused on real estate in AIAP region.
• Tracks MSCI AC Asia Pacific Real Estate Index.

Performance:

• Registered a 9.61% loss during the sub-period, underperforming the underlying index.

Assets:

• Highly concentrated in Hong Kong and China (64% of net value).
• Mostly strict listed REITs.

7. ChinaAMC NASDAQ 100 ETF

Introduction:

• Passively managed ETF tracking the NASDAQ-100 Index.
• Aims to replicate components using full or representative sampling strategies.

Performance:

• Showed the steepest loss among all funds (-28.92%).
• Market conditions likely influenced performance.

Assets:

• Apple and Microsoft are the two largest holdings, each accounting for >10% after hedging.

Overall Key Observations

• Negative Returns: Most of the funds, particularly the NASDAQ and Bond ETF, registered significant losses in localised periods due to various market dynamics.
• Concentration: Several funds reveal high concentration in specific stocks or bond issues.
• Risk Factors: High currency hedging costs are noted, potentially distorting returns in some cases. Derivatives exposure significantly varies across funds.

Recommendations

• Investor Caution: The significant losses observed especially in bond and US tech-heavy funds suggest potential risks associated that may require careful monitoring.
• Diversification: Consider if more balanced portfolios within Asia would be better suited based on risk appetite.
• Currency Hedging: Understand that hedged exposure can decouple performance from the underlying index, often not necessarily translating to profit from foreign investors' view.