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FSA publishes English translations of regulation on Credit Rating Agencies
March 31, 2010--The Financial Services Agency (FSA) has been engaged in efforts to translate major relevant regulations on Credit Rating Agencies (CRAs). As a consequence, the FSA today publishes English translations of Financial Instruments and Exchange Act, Cabinet Office Ordinance on Definitions under Article 2 of the Financial Instruments and Exchange Act, and the Cabinet Office Ordinance on Financial Instruments Business, etc. related to regulation on CRAs, and the English translation of Guidelines for Supervision of CRAs.
Please note that these are unofficial translations. Only the original Japanese text of laws and regulations has legal effect. The translations are to be used solely as reference material to aid in understanding of Japanese laws and regulations. The Government of Japan shall not be held responsible for the accuracy, reliability or currency of the legislative material posted on this website, or for any consequences resulting from use of the information on this website. For all purposes of interpreting and applying laws and regulations to any legal issue or dispute, users should consult with the original Japanese texts published in the official gazette.
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Source: FSA Japan
Retail participation in the Hong Kong stock market remains high
March 31, 2010--A survey conducted by Hong Kong Exchanges and Clearing Limited (HKEx) during the period from 13 November to 23 December 20091 revealed that retail participation in the HKEx stock market remains high. Over one-third of the Hong Kong adult population are stock investors, ie individuals who invest in products on the HKEx securities (or stock) market. According to the survey, 35.1 per cent of the Hong Kong adults were retail investors, ie individuals who participate in the HKEx stock market or derivatives (ie futures and options) market or both, compared to 35.8 per cent in 2007.
The Retail Investor Survey 2009 revealed that:
35.0 per cent of Hong Kong adults (or 2,059,000 individuals) were stock investors (individuals who at the time of interview were holding stocks, or had traded them in the 12-month period preceding the interview).
32.6 per cent of Hong Kong adults were stockowners who were holding stocks at the time of interview. The median stockholding value among all stock investors (including non-stockowners) was $100,000. The median number and value of listed company shareholdings among all stock investors (including non-shareowners) was three and $100,000 respectively.
About 10 per cent of stock investors invested in warrants2 (ie were holding warrants at the time of interview or had traded them in the 12-month period preceding the interview) and 7 per cent invested in Callable Bull/Bear Contracts (CBBCs) (ie were holding CBBCs at the time of interview or had traded them in the 12-month period preceding the interview). Collectively about 12 per cent of stock investors invested in structured products (ie warrants and/or CBBCs).
view Retail Investor Survey 2009
Source: Hong Kong Exchanges and Clearing Limited (HKEx)
Precautionary measures from issuers listed by introduction
March 31, 2010--Hong Kong Exchanges and Clearing Limited (HKEx) has issued the following statement in response to media enquiries regarding precautionary measures adopted by issuers listed by introduction to ensure that their shares are traded on an orderly, informed and fair basis.
In December last year, the Stock Exchange of Hong Kong (the Exchange), a wholly-owned subsidiary of HKEx, said it would consider applications for listing by introduction only if the new applicant and its sponsor could satisfy the Exchange that there would be adequate precautionary measures in place on and from the first day of listing on the Exchange
In the first approved listing by introduction since then, a Singapore-listed real estate investment trust – Fortune Real Estate Investment Trust (Fortune REIT) – has adopted certain precautionary measures in order to provide reasonable supply of units and information to investors and to contribute to the liquidity of trading in the units upon its debut on the Hong Kong market.
Fortune REIT is a REIT authorised by the Securities and Futures Commission (SFC) under section 104 of the Securities and Futures Ordinance. Both the SFC and the Exchange have been consulted in developing the Fortune REIT precautionary measures. These measures were spelled out in section 19 of the issuer’s listing document.
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Source: Hong Kong Exchanges and Clearing Limited (HKEx)
Beijing gears up to reform equity trades
March 29, 2010--After years on the drawing board and several false starts, Chinese regulators are finally close to introducing a set of new tools for traders in the country’s volatile equity markets.
The three innovations, consisting of the introduction of stock index futures, short selling and margin trading, amount to milestones for the country’s capital markets.
China will launch margin trading and short selling – tools that allow traders to use greater leverage and to profit from falling as well as rising markets – as soon as Wednesday, Zhang Yujun, president of the Shanghai Stock Exchange, told reporters in Beijing over the weekend.
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Source: FT.com
Beijing gears up to reform equity trades
March 29, 2010--After years on the drawing board and several false starts, Chinese regulators are finally close to introducing a set of new tools for traders in the country’s volatile equity markets.
The three innovations, consisting of the introduction of stock index futures, short selling and margin trading, amount to milestones for the country’s capital markets.
China will launch margin trading and short selling – tools that allow traders to use greater leverage and to profit from falling as well as rising markets – as soon as Wednesday, Zhang Yujun, president of the Shanghai Stock Exchange, told reporters in Beijing over the weekend.
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Source: FT.com
Disclosure Items concerning Corporate Governance
March 26, 2010--The Financial Services Agency made amendments to Cabinet Office Ordinance on Disclosure of Corporate Affairs, etc. so as to require listed companies to disclose the following information concerning corporate governance, after taking into consideration public comments on the proposal that we released on February 12, 2010. The new rules will be effective from March 31, 2010.
view Outline of Disclosure Items concerning Corporate Governance
Source: FSA JAPAN
Chinese government says determined to keep yuan steady
March 26, 2010--China reaffirmed its determination on Friday to keep the yuan steady, rejecting US arguments that a stronger exchange rate is needed to help iron out global trade imbalances.
On a busy day for official pronouncements, a deputy central bank governor painted a rosy picture of China’s economic prospects and said Beijing would tweak monetary policy accordingly.
“At a time of crisis, maintaining the stability of major exchange rates is not only beneficial to China, it is also beneficial to the world.
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Source: Todays Zaman
Deutsche launches 11 UCITS-compliant China A-Share ETFs in HK
March 26, 2010--Deutsche Bank has launched Hong Kong’s first UCITS III-compliant Exchange Traded Funds (ETFs) tracking the performance of ten CSI300 sector indices, as well as one ETF tracking the performance of the CSI300 Index itself, an index that replicates the performance of the 300 most representative A-shares listed on the Shanghai and Shenzhen stock exchanges.
“The new ETFs provide Asian investors with a transparent and liquid investment option and allow them cost-effective ease of access to the performance of the mainland Chinese equity market,” said Marco Montanari, Asia head of Deutsche Bank’s ETF platform, db x-trackers.
The ETFs are backed by the robust UCITS III fund regulations, allowing them to be sold throughout the countries of the European Union and limiting net counterparty risk exposure to 10% of the relevant ETF’s net asset value.
The 11 new China A-share ETFs listed on The Stock Exchange of Hong Kong Limited (SEHK) have an annual all-in fee of 0.50% each – less than half the fee cost of other China A-share ETFs listed in Hong Kong.
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Source: Asian Asset Magazine
DB Index Research -- Weekly ETF Market Review -- Asia-Pacific
March 24, 2010--Highlights
Market Overview
There are 207 equity based ETFs in the Asia Pacific region with 285 listings across 12 countries and 15 exchanges. Japan has the largest market share by AUM accounting for 42.03% of the whole market, whilst China has the largest market share by turnover with 35.15%.
There were sixteen new listings in the last week. ETF Securities listed the largest range of commodity products in Asia (14) on Tokyo Stock Exchange, Benchmark AM listed the first International ETF (1) on the Indian NSE and Deutsche Bank AG listed the first ETF (1) in Asia offering global exposure to dividends on the Singapore Stock Exchange.
Turnover
Monthly average daily turnover rose 2.8% in the last week. Turnover for the previous week was USD 706m. The largest ETF by turnover was the China 50 ETF issued by China Asset Management with USD 146m accounting for 20.6% of total turnover.
Assets Under Management
AUM remained at about the same level in the previous week. AUM as of March 22nd were USD 60.3bn. The largest ETF by AUM is the TOPIX ETF managed by Nomura Asset Management with AUM of USD 6.4bn.
To request a copy of the report
Source: Aram Flores and Shan Lan -DB Index Research
DB Index Research -- ETF Investment Considerations for Asian Investors
March 24, 2010--Highlights
The global ETF/ETP market has grown at an extremely fast pace over the past five years. In December 2009, Assets Under Management (AUM) of US and European ETPs crossed the one trillion US dollar mark.
While the Asian ETF market is still in its infancy, we believe that a number of forces are building to bring it to a tipping point that will result in accelerated growth rates. Increased coordination among regulators in Asia, a larger range of ETF products and increased use of beta index products are some of the factors which will propel Asia’s ETF market growth in the next year.
Physical replication and synthetic replication are two of the most common structures used in the construction of ETFs. Physically replicated ETFs buy all or a representative portion of the underlying securities in the index that they track. In contrast, ETFs employing synthetic replication use a basket of collateral securities, which bear no resemblance to a fund’s index’s constituents, and a total return swap, as part of their investment holdings. The total return swap holding will ensure that the fund replicates the performance of the underlying index.
Most of the US ETFs utilize physical replication, while European ETFs use both physical and synthetic replication. Each structure has a number of relevant considerations that need to be understood.
We conducted a study comparing the performance of both US and European domiciled ETFs tracking Asian benchmarks. We found that synthetic ETFs tracked their benchmark better than physically replicated ETFs for all of the indices examined.
The tracking difference is especially apparent for physical replication of broad indices, such as the MSCI Emerging Markets, for which optimized baskets are used. Optimization entails sampling techniques to physically replicate an index, often leading to a basket that might include significantly fewer constituents, thus introducing a major source of tracking error. Unlike physically replicated ETFs which face such practical replication challenges, the performance of synthetic ETFs is not impacted by the sampling issue.
In addition to tracking difference we have observed that European and US ETFs have different tax implications when it comes to dividend treatment. European domiciled ETFs are generally more tax efficient for Asian investors as dividends of US domiciled ETFs are taxable in the US.
As the US ETF market is larger, and often more competitive, than the European market, we have observed that ETF bid/ask spreads tend to be tighter in the US. Therefore, in the short term holding US domiciled ETFs is more cost effective. In the long term however, for those ETFs that have larger tracking errors associated to them, European domiciled ETFs might prove to be more effective, since US ETFs utilize physical replication which we have observed to have higher levels of tracking error associated with its holding. US dividend tax treatment also reinforces this conclusion.
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Source: DB Index Research
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