BlackRock Inc., world’s largest money manager based in New York, has listed an equity exchange-traded fund (ETF) tracking the Kospi200 index on the Hong Kong Stock Exchange, its second ETF using a foreign country’s stock index as an underlying asset. It is also the first time that a foreign asset manager has introduced an ETF tracking the South Korean stock index that consists of 200 blue chip local companies.

According to Korea Exchange (KRX) on Wednesday, it signed an agreement with BlackRock to allow the U.S. asset manager to list iShares Core Kospi200 index ETF based on the Kospi200 index on the stock exchange of Hong Kong.

It is the first time for BlackRock to design an ETF using the Kospi200 index as an underlying asset and the second time to introduce an ETF using a stock index of a foreign country. In 2009, BlackRock introduced iShares CSI 300 A-share index ETF based on China’s CSI300 A-share index. Global asset managers often introduce ETFs based on global indexes such as the Morgan Stanley Capital International (MSCI) index or the Financial Times Stock Exchange (FTSE) index, but not with stock indexes of individual foreign countries.

Jung Sang-ho, head of information business department under management support division at KRX, said BlackRock and KRX have worked together to design the new ETF product for a year since the U.S. asset manager first showed interest in developing an ETF using the Kospi index.

The ETF listed by BlackRock in Hong Kong uses the Kospi200 Net Total Return (NTR) index, which is known to have generated 10 percent higher return than has the Kospi200 index. The new ETF is U.S. dollar denominated after dividend income is reflected, making it more convenient and easier for offshore investors to invest. According to BlackRock, the initial operating fund is $10 million and it aims to increase it to $250 million in three years.

By Bae Mi-jung, Yoo Tae-yang

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