KraneShares introduces China ‘One Belt One Road’ ETF

Sep 11th, 2017 | By | Category: ETF and Index News

New York-based ETF provider KraneShares has launched the KraneShares MSCI One Belt One Road ETF (NYSE Arca: OBOR) which invests in strategic companies from countries participating in China’s One Belt One Road (OBOR) initiative.

Jonathan Krane, CEO of KraneShares

Jonathan Krane, CEO of KraneShares.

The OBOR initiative is an infrastructure-focused, long-term modernization of the original Silk Road trading routes. The strategy connects China by land through Central Asia, West Asia, the Middle East, and Europe (“One Belt”), and by sea to the western coast of Africa, the Red Sea, and the Mediterranean (“One Road”). All together the OBOR initiative will connect 69 countries (including China), representing an aggregate population of 4.5 billion and a nominal GDP of $23 trillion. These figures represent approximately 62% of the world’s population and 30% of global GDP.

The OBOR initiative seeks to provide a solution to the growing need for infrastructure development across the region. A recent report by the Asian Development Bank estimates that Asia and the Pacific will need $1.7tn in annual infrastructure investment amounting to as much as $26 trillion by 2030.

“We believe the OBOR initiative is creating a new paradigm in global investing,” said Jonathan Krane, CEO at KraneShares. “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.”

The KraneShares OBOR ETF delivers thematic exposure to the OBOR initiative by tracking the MSCI Global China Infrastructure Exposure Index. The index represents the performance of listed companies within developed, emerging and frontier markets with high revenue exposure to China infrastructure development from within a specified set of industries relevant to the OBOR investment program.

According to the fund’s prospectus, the most significant country exposures are expected to be China, Russia, Singapore, Malaysia, and Israel, among others, while the sectors most likely to have high exposure to revenue generated from the OBOR initiative include industrials, utilities, materials, financials, and energy.

“The MSCI Global China Infrastructure Exposure Index highlights MSCI’s commitment to designing innovative benchmarks for global investors,” said Christine Berg, managing director at MSCI. “This index aims to capture the performance of wide-ranging global infrastructure investment opportunities represented by China’s OBOR initiative.”

OBOR has a total expense ratio (TER) of 0.79%.

KraneShares recently announced it had entered into a definitive agreement with China International Capital Corporation (CICC) for the latter to acquire a 50.1% majority stake in KraneShares. CICC was founded in 1995 by China Construction Bank and Morgan Stanley and was the first investment bank formed through a China-US joint venture. CICC serves corporate, institutional, government, and wealth management clients in China (See: “CICC to acquire majority stake in KraneShares“).

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