Ignites Asia

May 15, 2014 12:58 pm

Stoxx determined to raise its profile in China

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Ignites Asia

Ignites Asia, a Financial Times publication, provides news and analysis of the Asian fund industry. http://www.ignitesasia.com

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Zurich-based index provider Stoxx is expanding its business in China by bringing its European indices to the market in the short term and developing what it describes as innovative indices in the medium term, according to chief executive Hartmut Graf.

Stoxx is a newcomer to China compared with some other international index providers, such as FTSE, which has tapped into the Chinese market for a decade.

The lack of familiarity among Chinese investors of the Stoxx name has been a problem for the company, and thus it has rolled out some strategies to promote its brand name, Mr Graf says.

Last week, Stoxx introduced the Chinese version of its name across the Greater China area, showing the company’s commitment and growing presence in the area, he says. Its Chinese name, Shi Tuo, symbolises power and being an innovator.

Aside from the pure marketing approach, the company will go back to the market and provide systematic education to Chinese investors together with its partners in China or Chinese asset managers to which it licenses its Stoxx indices, Mr Graf says.

“We will try to increase the knowledge of investors of some of our products in detail,” he says.

The company will grow its business in China in a prudent way by adding people in the market in a controlled way, Mr Graf says, adding that it will try to avoid expanding too fast with no balance.

Stoxx opened its Hong Kong office in May 2011, and it does not have any offices in China at the moment. Mr Graf expects Stoxx’s business in China to take off significantly, noting the company will set up an office in the market when the time is right.

The company is in discussions with some market participants, and it expects to launch new indices in China within the next couple of months, Graf says, without elaborating.

Stoxx now has 13 index concepts linked to the China market, which are calculated in a variety of currencies and versions, such as price, net return and gross return.

Mr Graf believes that Stoxx is in a position to offer Chinese investors a wide range of indices to help meet their demand for broad diversification into global markets.

In the short term, Mr Graf says Stoxx will provide Chinese investors with European market indices and help them diversify their portfolio into overseas markets.

In the medium term, he says, the company will try to bring more innovative and advanced concepts of indices to China within five years using its experienced methodologies in that area.

Stoxx granted a licence to China Universal Fund Management in February 2013 to launch an ETF that invests in its Euro Stoxx 50 Index. That ETF has yet to be launched, however.

A source close to China Universal, who declines to be named, says the company does not have any plan at the moment to launch that ETF because it is not positive about China’s qualified domestic institutional investor ETF market at the moment.

Stoxx granted a licence to ICBC Credit Suisse in July 2013 for the same STOXX Europe 50 Index, which also hasn’t been launched.

Stoxx’s clients in Asia fall into two major categories: those who issue passive products, such as fund companies, and institutional investors, such as pension funds, according to Mr Graf.

He says there are some clients looking for specific solutions, such as investments in their home countries and investments excluding their home country. The company is trying to offer such services for its Asian clients.

Being a subsidiary of Deutsche Börse, Stoxx uses the representation of its shareholder in Asia while also setting up some of its own offices in the region. Aside from Hong Kong, Stoxx also has offices in Tokyo and Singapore.

Stoxx is well known for its flagship European indices, such as the Euro Stoxx 50 Index that consists of the 50 largest stocks from the Eurozone, covering the financials, consumer goods, basic materials, industrials, oil and gas, technology, healthcare and utilities sectors.

Mr Graf says bringing those European indices to more Asian investors is one of his missions in the region.

“We want to be a full-service index provider rather than simply marketing our indices in Asia,” he says.

Stoxx is also building Asian related indices to meet the needs of Asian clients.

Stoxx licensed its German blue-chip index, DAX, to Hua An Fund Management in September 2012 to underlie the first DAX exchange-traded fund (ETF) in China.

The company’s most recent accomplishments in the Asian region are the licensing of the Stoxx Asean-Five Select Dividend 50 Index to Nomura for an ETF that was listed in Tokyo on March 12 and the licensing of the Euro Stoxx 50 Index to Mirae Asset Global Investments for an ETF listed in Seoul on April 30.

Stoxx has a wide range of innovative indices, such as some smart beta strategies, but the knowledge of sophisticated investors in Asia has not reached a significant enough level for the company to bring such strategies to the region, Mr Graf says.

Unlike the European market, the Asian ETF market is primarily driven by retail investors rather than institutional investors, says Mr Graf. It may still take some time for the markets to ultimately go for sophisticated concept ETFs, he adds.

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