Harvest Fund Management has launched the Harvest FTSE China A50 Index ETF on Shanghai Stock Exchange, offering investors a new channel to participate in the growing blue-chip market in China. The fund is the first domestically listed ETF to track a FTSE Russell index.
A Shares are stocks of Chinese mainland companies listed on either the Shanghai or Shenzhen stock exchanges.
Jing Lei, managing director, CIO of institutional investment and fixed income, Harvest Fund Management, said: “China, as the second-largest economy of the world and the largest economy in emerging markets, is considered the most under-allocated market by international investors. With the opening up of the Chinese capital market, Harvest Fund Management believes that more global investors will increase their allocation in China A Shares. We are delighted to become the first provider of a FTSE China A50 Index ETF in the domestic China market.”
Jessie Pak, managing director, Asia, FTSE Russell, added: “We are delighted to work with Harvest Fund Management to support the demand from end investors to capture investment opportunities in China. China continues to make good progress in opening its domestic A Shares market to international and regional investors.”
The FTSE China A50 Index represents the 50 largest A-Share companies by market capitalisation, adjusted for liquidity and tradability. A-Shares are stocks of companies incorporated in mainland China that trade in Chinese yuan on domestic exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange.
The index is dominated by the financial sector, which has a weight of approximately 62%, with banks accounting for about 39%. Major holdings include Ping An Insurance, China Merchants Bank, Industrial Bank, and China Minsheng Banking.
The index has outperformed the FTSE China A All-Share Index, a broader representation of China A Share performance, over the previous one year (21.0% vs 7.0%), three year (20.1% per annum vs 15.3% p.a) and five year (13.0% p.a vs 12.2% p.a) time periods, as of 31 July 2017.
China A-shares are typically only available for purchase by citizens of mainland China, which is why many ETFs covering this segment have been structured synthetically using swaps. In recent years, Chinese authorities have extended the Renminbi Qualified Foreign Institutional Investors (RQFII) scheme which allows foreign investors to hold A Shares physically. A number of ETFs have been launched under this scheme.
ETFs linked to the FTSE China A50 Index include the synthetically-replicated iShares FTSE A50 China ETF (2823) and the physically-replicated CSOP FTSE China A50 ETF (2822), both listed on the Hong Kong Stock Exchange.
In Europe, investors can gain access to the performance of the FTSE China A50 Index through ETFs provided by Commerzbank or Source. The ComStage FTSE China A50 UCITS ETF (Xetra: C024) has a total expense ratio (TER) of 0.40% while the CSOP Source FTSE China A50 UCITS ETF (LON: CHNA) has a TER of 1.11%. Each ETF has approximately $20 million in AUM.