A Quirky New China ETF

July 24th at 4:20pm by Tom Lydon

Ever since Mao Zedong headed the Chinese government, China has undergone a series of “Five-Year Plans” that focused on specific sector growth. Now, KraneShares launched an exchange traded fund to help investors capitalize on Beijing’s current plan.

According to a press release, the KraneShares CSI China Five-Year Plan ETF (NYSEArca: KFYP), which tries to reflect the performance of the CSI Overseas China Five-Year Plan Index, began trading Tuesday, July 23. The fund will re-allocate holdings to cover targeted growth industries based on China’s current fiscal and domestic plans, or Five-Year Plan. KFYP has a 0.68% expense ratio. [China ETFs Strengthen on Growth Pledge]

“The KraneShares CSI China Five-Year Plan ETF provides investors with an opportunity to align themselves directly with China’s current domestic investment initiatives,” Brendan Ahern, Managing Director of KraneShares, said in the press release.

Currently, KFYP holds companies in targeted sectors of China’s 12th Five-Year Plan, including technology, domestic consumption, clean energy, industrial and healthcare. The Twelfth Five Year Plan (2011-2015) focuses on increasing domestic consumption, modernizing agriculture through mechanization and improvement of agricultural service businesses; encouraging stable urbanization; promoting energy saving and environmental protection; and encouraging domestic technological innovation.

KFYP’s sector allocations include information technology 36.0%, consumer discretionary 16.6%, industrials 15.0%, consumer staples 14.6%, materials 6.4%, utilities 5.8% and healthcare 5.6%.

In comparison, other China-related ETFs are heavily allocated toward the financial, energy and telecom sectors and include many state-owned companies.

“Many US investors have little or no exposure to China, the second largest economy in the world,” Ahern added. “When they do invest in China directly or through broad emerging market exposure, many investment strategies provide a narrower representation of the Chinese economy due to their heavy weights in financials and energy.”

For more information on new fund launches, visit our new ETFs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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