China Securities Index Company Ltd (CSI) yesterday launched a new index designed to give a better representation of the Hong Kong stock market's performance.

The CSI HK 100 Index will screen 100 Hong Kong securities, including blue chips, H-shares and red chips, painting an overall picture of the Hong Kong stock market.

Also yesterday, BOCI-Prudential Asset Management Ltd launched the first Exchange Traded Fund (ETF) to track CSI HK 100.

CSI HK 100, a new indicator to measure the performance of 100 Hong Kong securities, makes its debut yesterday. Amy Lam

CSI, founded in 2008, is a joint venture between the Shanghai Stock Exchange and Shenzhen Stock Exchange, creating and managing the securities index and index-related derivatives services such as the CSI 300 Index - a key index monitoring Shanghai and Shenzhen stock markets.

The ETF, named WISE-CSI 100 Tracker, will list on the Hong Kong Stock Exchange May 15.

"The purpose of the index is to cope with the demand from mainland investors, as Hong Kong is the most important foreign market," said Liu Zhong, vice general manager of CSI, referring to the 21 QDIIs (qualified domestic institutional investors) on the mainland with a current scale of $120 billion.

Ma Zhigang, managing director of CSI, said he believes the new index will become an important benchmark index for both QDII products and global investors investing in Hong Kong.

However, Liu said there are some regulatory issues for an index-tracking ETF to list on the mainland exchange, such as the issue of redemption, settlement and foreign-exchange translation. Meanwhile, CSI is researching the possibility of launching other products, such as options linking the index, to be launched in Hong Kong.

It will also take some time for CSI to communicate with mainland fund-management companies to see whether they are interested in issuing such a product, Liu added.

The index is a weighted index with a base date and base point of Dec 31, 2004, with the biggest weight of 10 percent per stock. CSI will evaluate the constituent every six months.

HSBC and China Mobile, which weighted 11.3 percent and 10.7 percent, respectively, are the biggest constituents in the index.

Other heavyweights include China Construction Bank, Industrial and Commercial Bank of China, China Life Insurance, PetroChina, CNOOC, Sun Hung Kai Properties, Cheung Kong and the Hong Kong Exchange.

An executive director at a European investment bank said the new ETF is quite similar to current index-tracking funds such as Tracker Fund and Hang Seng H-Shares ETF. Hence, he does not see the niche of the new fund.

"If such fund can be listed on mainland, it will be quite popular, because this will give retail investors another option to buy Hong Kong equities besides the current QDII funds," he said. "Yet, the regulatory issues are too complicated to be solved in the short term."

He said the criteria to judge whether an index is useful include whether it is representative or whether it has unique features.

The trading board lot size is 200 units with an offer price per unit of about HK$20, which amounts to approximately HK$4,000 per lot.

Managed by BOCI-Prudential Asset Management, BOCI-Prudential Trustee Limited is the trustee and custodian, and Citigroup Global Markets Asia is the initial participating dealer.

(HK Edition 05/08/2008 page3)