Japanese fund management group Nikko Asset Management has launched on the Singapore Exchange ( SGX ) the Amova MSCI AC Asia ex Japan ex China Index ETF, the name of which anticipates the firm’s new name, Amova Asset Management, effective from September 1.

This exchanged-traded fund ( ETF ), which tracks the MSCI AC Asia ex Japan ex China Index, provides exposure to the performance of large and midcap companies in both developed and emerging markets in Asia, excluding Japan and China.

The ETF aims to maximize growth and accumulate wealth for investors over the longer term by reinvesting dividends paid by underlying constituents back into the fund.

The fund, Nikko says, introduces a more precise way to capture Asia’s growth markets. For decades, investors have tended to view Asia in two parts – Japan and Asia ex-Japan – due to Japan’s outsized market dominance. Today, China, the world’s second-largest economy, the company argues, has also become an asset class in its own right.

By excluding Japan and China, the ETF, the asset manager states, the ETF provides a more balanced representation of Asia’s emerging and developed markets, while maintaining exposure to the region’s long-term growth drivers.

Two trends underscore the growing demand for such ETFs: 

• Recent data indicates a significant shift in investor preferences. Assets in funds that omit China have surged by 75% this year, reaching US$26 billion.  These funds have attracted US$10 billion in net inflows, surpassing broader emerging market funds.  
• Assets invested in the ETFs industry in Asia-Pacific ( ex-Japan ) reached a new record of US$979.28 billion at the end of July 2024 beating the previous record of US$924.01 billion at the end of June 2024.

The ETF gives direct exposure to structural mega-trends that are occurring globally and in Asia. One such trend is the wider adoption of artificial intelligence. The computer chips underpinning it are manufactured largely in Taiwan and Korea. There is also the renaissance of the Indian investor embracing their local equities, and the rise, once again, of Southeast Asia as a manufacturing hub.

“This ETF is designed to provide a modern and targeted approach to investing in Asia – giving investors access to the region’s dynamic growth while mitigating concentration from the two largest economies,” says Phillip Yeo, the company’s international head of product development and management, and joint global head of ETF business for Asia. “As the first of its kind on SGX, it introduces a fresh perspective on portfolio construction for Asia’s evolving markets.”