BMO's Fullgoal to launch first Shanghai index ETF

SHANGHAI Dec 27 (Reuters) - Bank of Montreal's (BMO.TO) China fund venture will launch the country's first exchange-traded fund (ETF) that tracks the benchmark Shanghai stock index, heralding more innovations in ETF products to come in the world's second-biggest economy.

Fullgoal Fund Management Co said on Monday it would launch early next year an ETF that tracks the Shanghai Composite Index .SSEC, China's first equity index that was compiled two decades ago when the country's stock market was established.

Despite a boom in index publishing over the past 20 years, the Shanghai Composite Index -- representing 923 companies listed in the city -- remains the most influential index both home and abroad, said Xie Wei, vice general manager of the Shanghai Stock Exchange.

"Despite academic debates over the representativeness of the index," it remains the most-watched index in China, and is widely viewed as a barometer of the broad domestic market," Xie told a launch event for the new ETF in Shanghai.

The Shanghai Composite Index, which started at 100 points in December 1990, ended 1.9 percent lower on Monday at 2,781.4 points. .SSEC

No fund house has yet attempted to launch an ETF linked to the index before, in part because of the technical challenges of tracking an index based on nearly 1,000 companies.

The more than 2,700 percent surge in the Shanghai index during the past two decades compares with a 660 percent gain in Hong Kong's Hang Seng Index .HSI and a 333 percent rise in the Dow Jones Industrial Average .DJI over the same period.

Having already launched 20 ETFs in the past years, Chinese fund managers have announced plans to continue their innovative push in the ETF arena, including the country's first ETFs tracking overseas indexes and the first ETF products that invest in both Shanghai- and Shenzhen-listed stocks.

Chinese fund houses may next year launch ETFs that track the CSI300 index .CSI300, which represents the country's biggest companies that trade on China's two exchanges, according to Wu Xianxing, analyst at Haitong Securities Co in Shanghai.

The CSI300 is used as the underlying index for China's index futures, so planned ETFs tracking the index would draw interest from investors seeking risk hedging or arbitrage, Wu said. (Reporting by Samuel Shen and Jason Subler. Editing by Jane Merriman)