Deutsche Offers New Spin on China ETFs

There are roughly 260 exchange traded funds offering access to China, the world’s second-largest economy. None offer investors direct access to China’s A-shares, which trade in Shanghai and Shenzhen.

That will change Wednesday when Deutsche Asset & Wealth Management, the ETF unit of Deutsche Bank, introduces the db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR).

Deutsche’s partnership with Harvest Fund Management, China’s second-largest asset manager, is a key element in the bank being able to offer an A-shares ETF that holds actual equities. Harvest is a Renminbi Qualified Foreign Institutional Investor (RQFII), which means it meets Chinese regulatory requirements to be a foreign owner of A-shares.

The China ETFs U.S. investors are most familiar with, including the iShares China Large-Cap ETF (NYSEArca: FXI) and the SPDR S&P China ETF (NYSEArca: GXC), hold H-Shares, which trade in Hong Kong, London or New York.

Rival A-shares products such as the Market Vectors China ETF (NYSEArca: PEK) and the newly minted, actively managed PowerShares China A-Share Portfolio (NYSEArca: CHNA) hold swaps on A-shares indices, not actual stocks, though CHNA is seeking RQFII approval. [Exposure to China A-Shares With ETFs]

ASHR will start with a gross expense ratio of 1.08%, but Deutsche expects that will be reduced as the fund accumulates assets. The new ETF will track the CSI 300 Index, a collection of the largest stocks trading in Shanghai and Shenzhen.

Top holdings in the index include China Minsheng Banking, China Merchants Bank, Industrial Bank, Ping An Insurance, Shanghai Pudong Development Bank, Haitong Securities and China Vanke.