HONG KONG, May 11 – CSOP WTI Oil Annual Roll December Futures ER ETF (“CSOP Crude Oil ETF”) (stock code: ) will list on Hong Kong Stock Exchange tomorrow, enabling Hong Kong and overseas investors to get access to the crude oil market by simply investing into this convenient and transparent ETF product.
As the first futures-based ETF product issued by a Chinese manager, the CSOP Crude Oil ETF provides investment results closely corresponding to the performance of BofA Merrill Lynch Commodity index eXtra CLA Index (Excess Return), which tracks the performance of December month WTI Futures Contracts and seeks to reduce transaction costs by rolling only once a year.
As the first Hong Kong-listed Crude Oil ETF applying an enhanced strategy involving rolling the futures contract on an annual basis, the CSOP Crude Oil ETF attracted 40million USD initial investment and is the largest crude oil ETF listed in Hong Kong. The inception price per unit is around 43 HKD per unit.
Seeking to reduce transaction costs by tracking the annual-rolling oil futures index
All of the crude oil ETFs in the market obtain exposure to crude oil through investing in crude oil futures as physical investment for crude oil is very difficult due to storage and transportation costs. Due to the complexity of crude oil investment, the tracking and return of crude oil ETFs could vary significantly depending on the index methodology adopted by the ETFs.
After 2007, crude oil ETFs introduced globally have adopted enhanced strategies that aim to reduce costs associated with crude oil investments; at the same time, some of the conventional strategies that simply roll on a monthly basis the nearest-month futures contact have also received some criticisms.
After thorough research, CSOP has selected to track the BofA Merrill Lynch Commodity index eXtra CLA Index (Excess Return); CSOP Crude Oil ETF invests in the WTI December futures contracts and adopts an annual rolling strategy that could reduce the transaction cost effectively. This is the first enhanced annual-rolling crude oil ETF in Hong Kong.
Historically, the Index adopted by CSOP Crude Oil ETF significantly outperformed the conventional front-month monthly-rolling index in both bull and bear markets by more than 35% in the successive past ten years. (Source: Bloomberg, as of 31 March, 2016)
Oil Price hovering around 10-year low and implying potential of rebound
Additionally, given the historical low price of crude oil in recent 10 years, crude oil investment draws a lot of attention from global investors. The launch of the CSOP Crude Oil ETF will provide Hong Kong investors with a convenient and transparent way to capture the growth potential.
In recent years, the shale oil revolution, together with the increase in supply and geographical game played between oil production countries to fight for market-share, pushed the crude oil price down from $116/barrel in 2014 to $40/barrel recently, losing almost 70% in less than two years. (Source: Bloomberg, as of 31 March, 2016) From a historic point of view, the crude oil price is now lingering at a 10-year low level and is lower than the breakeven points for most crude oil producers, having potential of rebound.
Hong Kong ETF leader bringing its 9th ETF product to Hong Kong investors
Since its inception in 2008, CSOP has demonstrated a remarkable track record with credibility and success as a leading ETF manager in Hong Kong, with 9 ETFs listed on the Hong Kong Stock Exchange including this newly launched CSOP Crude Oil ETF. Ms. Ding Chen, CEO of CSOP comments “I am very proud of what we achieved in the past years and we are very confident that we will bring more excellent ETF products to Hong Kong and global investors.”
Melody He, Head of ETF and Index Solutions, adds “As one of the first ETF issuers to bring oil futures ETF product to the Hong Kong market, we spend a lot of time on figuring out what is the best for investors. Smart investment solutions are always our priority in relation to product design. I am confident in this product as the efficient annual rolling strategy adopted by CSOP Crude Oil ETF will seek to bring a better performance to investors than the conventional monthly rolling futures strategy in a longer term.”