The Market Vectors China ETF (NYSEArca: PEK), the first U.S.-listed ETF to offer exposure to China’s A-shares, is moving closer to holding equities instead of a basket of swaps and derivatives.
In a statement out Wednesday, Van Eck, the parent company of Market Vectors, said it has entered into
an agreement with China Asset Management, China’s largest mutual fund manager by assets under management. Under the agreement, China Asset Management will serve as the sub-advisor for the Market Vectors ChinaAMC A-Share ETF. That is the new name for PEK.
The on-the-ground partnership is essential for foreign ETF issuers looking make China’s A-shares more accessible to Western investors.
Currently, China limits foreign investors’ access to A-shares, which trade in Shanghai and Shenzhen, to Qualified Foreign Institutional Investors and Renminbi Qualified Foreign Institutional Investors. However, the world’s second-largest economy is looking to increase foreign investment after seeing its mainland equity markets stumble over the past several years. [China A-Shares ETF Could Impress Investors]
The db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR) has been successful right out of the gate following its early November 2013 launch due in part to 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. [A-Shares ETF Signals Increased Emerging Markets Access]
Market Vectors did not disclose exactly when PEK will begin holding physical A-shares, but the issuer anticipates that will happen “shortly.”