Hong Kong-Listed China A-Shares ETF Launches
July 20th 2012 at 8:44am by Tom Lydon
After launching on July 17, the Hong Kong-listed China AMC CSI 300 Index ETF has garnered $596 million in assets, or almost six times the assets of a similar fund, the iShares CSI 300 A-Share Index Fund, which began trading in Nov. 2009, reports Eleni Himaras for Bloomberg.
Before, ETF investors gained exposure to A shares through synthetic instruments. For instance, the Market Vectors China ETF (NYSEArca: PEK) utilizes derivatives to mimic the performance of the CSI 300 Index.
“The Chinese A share market accounts for nearly one fourth of the emerging-markets universe,” according to Morningstar analyst Abraham Bailin. “Access to the A share market has been restricted by regulatory capital controls for some time, so investors seeking truly globally diversified exposure have faced a number of obstacles in filling this exposure deficiency.”
The Hong Kong ETF gains access to Chinese companies through the Renminbi Qualified Foreign Institutional Investor quota.
“Investors welcome this genuine Asian ETF, because it’s backed by physical shares,” Ben Kwong, chief operating officer at KGI Asia Ltd., said in the report. “The synthetic shares had been popular before, because there was no substitute. It provides a good vehicle to invest.”
While the new Hong Kong-listed China ETF may not expose investors to counterparty risks associated with derivatives, the new ETF may be subject to the whims of mainland regulators as they are free to step in and revise the guidelines.
E Fund Management Co., CSOP Asset Management Ltd. and Harvest Global Investments are also waiting on approval for physically backed A-share ETFs. [China Prepares to Launch ETFs]
All Chinese A-share ETFs will have a 5 billion yuan, or $784 million, market cap on their value.
For more information on Hong Kong, visit our Hong Kong category.
Max Chen contributed to this article.
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