Krane Funds Advisors, known for its line of China-related KraneShares ETFs, has expanded on its China theme with a new strategy to capitalize on the emerging economy’s ambitious one belt one road infrastructure project.
On Frida, Krane Funds launched the KraneShares MSCI One Belt One Road ETF (NYSEArca: OBOR). OBOR comes with a 0.79% expense ratio.
The MSCI One Belt One Road ETF will try to reflect the performance of the MSCI Global China Infrastructure Exposure Index, which is comprised of companies that are more likely to be potential beneficiaries of China’s “One Belt, One Road” initiative that will emphasize the interconnectedness and cooperation between China and other Eurasian countries. Underlying components will include those whose revenues are more likely to benefit from China’s infrastructure development initiative, according to a prospectus sheet.
The index will include a 45% tilt toward Chinese issuers, including China A-shares, and 55% to other countries.
As of the end of August, country weights included China 44%, Singapore 10%, Malaysia 8%, Israel 6%, Russia 6%, Thailand 5%, Philippines 5%, India 4% and Poland 4%. Sector tilts included industrials 40%, materials 24%, utilities 16%, energy 11% and financials 9%.
“This index aims to capture the performance of wide-ranging global infrastructure investment opportunities represented by China’s One Belt One Road initiative,” Christine Berg, CFA, Managing Director at MSCI, said in a note.
The One Belt, One Road policy is a primary focus of Chinese President Xi Jinping and will be an extensive infrastructure initiative in an long-term modernization of the original Silk Road -based trading routes. The project will connect China b land through Central Asia, West Asia, the Middle East and Europe, or so-called One Belt, and by sea to western coast of Africa, the Red Sea and the Mediterranean, or so-called One Road. All-in-all, the initiative will connect 69 countries with an aggregate population of 4.5 billion and a nominal GDP of $23 trillion, or 62% of the world’s population and 30% of global GDP.
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The comprehensive infrastructure project will help solve the growing need for development across the region. Asian Development Bank calculated that Asia and the Pacific will require $1.7 trillion in annual infrastructure spending to total as much as $26 trillion by 2030.
“We believe the OBOR initiative is creating a new paradigm in global investing,” Jonathan Krane, Chief Executive Officer at KraneShares, said in a note. “The OBOR initiative will receive trillions of dollars of investment over the next decade and should increase the economies and trade of both China and the participating nations.”
For more information on new fund products, visit our new ETFs category.