Ahead of next week’s decision by index provider MSCI Inc. on the classification fate of China A-shares, some investors have been flocking to the KraneShares Bosera MSCI China A ETF (NYSEArca: KBA).
KBA “saw $49.5 million of inflows in May, its best month ever, according to data compiled by Bloomberg. So far in June, $67.5 million has poured into China equity funds listed in the U.S., compared with $100 million of outflows during the first five months of the year, the data show,” reports Viren Vaghela for Bloomberg.
Last year, China A-shares, the stocks trading on mainland exchanges in Shanghai and Shenzhen were boosted by speculation index provider MSCI could add those stocks to its international indices, including the widely followed MSCI Emerging Markets Index.
MSCI opted against that inclusion, but that does not mean A-shares are off the index provider’s radar. The opposite is true as MSCI remains actively engaged in client discussions regarding what steps need to be taken for A-shares to become appropriate fits for MSCI benchmarks. More than $1.5 trillion in global assets are benchmarked to the MSCI Emerging Markets Index.
Competitors to KBA include the VanEck Vectors ChinaAMC SME-ChiNext ETF (NYSEArca: PEK), VanEck Vectors ChinaAMC CSI 300 ETF (NYSEArca: CNXT), iShares MSCI China A ETF (BATS: CNYA) and db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR). However, KBA was the first A-shares ETF listed in the U.S. to track an index constructed by MSCI.
PEK tracks the CSI 300 Index, which includes the 300 largest and most liquid stocks in the China A-shares market. CNXT includes the 100 largest China A-shares stocks listed on the Small and Medium Enterprise Board and the ChiNext Board of the Shenzhen Stock Exchange. CNYA tracks an MSCI index composed of Chinese equities listed on the Shanghai and Shenzhen Stock Exchanges. ASHR also tracks A-shares taken from the CSI 300 Index.
“Despite the enthusiasm, Goldman Sachs Group Inc. said in a report that the odds of A shares being included by MSCI have fallen to 60 percent, down from 70 percent last year. The index provider has denied entry to China’s domestic shares three times, saying in a statement last year that policy makers needed to improve accessibility,” according to Bloomberg.
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