China A-Shares ETF

After securing a quota through the tightly regulated foreign investment program, Hong Kong-based Hang Seng Bank is planning to launch its first China A-shares exchange traded fund.

Hang Seng received a renminbi qualified foreign institutional investor (RQFII) quota of 1 billion yuan, or $163.4 million, reports Kanis Li for South China Morning Post. The ETF would track the Hang Seng China A Industry Top Index, which differs from other blue-chip indices in that it also selects components based on fundamental factors. [A Fundamental Approach to China ETFs]

Through the QFII system, foreign investors are able to access Chinese A-shares, which trade on the Shanghai Stock Exchange and the Shenzen Stock Exchange and are typically only available to mainland citizens. A-shares are also only quoted in the Chinese renminbi currency.

Bank of China Hong Kong, HSBC and Bank of East Asia have also acquired RFII licenses but have not revealed plans to launch products.

The Chinese government stated that it will expand the RQFII system to companies in London, Singapore and Taiwan.

The RQFII system also helps generate a greater yuan liquidity pool.