Van Eck Associates is currently negotiating with a China-headquartered asset manager to serve as sub-advisor for the Market Vectors China ETF (PEK).
The sub-advisor expects to receive its Renminbi Qualified Foreign Institutional Investor (RQFII) quota soon which, pending approval by the board of trustees of Market Vectors ETF Trust, would allow PEK to have direct access to physical A-Shares and provide enhanced access to the Chinese equity markets.
PEK seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the CSI 300 Index. The fund gains exposure to the China A-share market by investing in swaps that are linked to the performance of China A-shares and may directly invest in China A-shares through a sub-advisor’s A-share quota.
PEK celebrated its three-year anniversary last month as the first US-listed ETF to provide exposure to China’s A-Shares market. The fund, which launched on 13 October, 2010, had approximately USD34m assets under management (AUM) as of 30 September, 2013.
“PEK’s prospectus has allowed for an RQFII sub-advisor for some time, so we are excited that the Chinese market has finally opened up so the fund can pursue utilising this type of arrangement,” says Amrita Bagaria, ETF product manager with Market Vectors.
The A-Share market was originally open to only domestic People’s Republic of China (PRC) citizens. However, beginning in 2002, foreign investors were given access to the A-Share market via the Qualified Foreign Institutional Investor (QFII) quota programme. The RQFII quota programme was later introduced by the Chinese authorities in December 2011 and allows Hong Kong subsidiaries of fund management companies and securities houses from mainland China to launch RMB investment products in Hong Kong and invest in securities listed in mainland China.
The CSI 300 Index is a modified free-float market capitalisation weighted index compiled and managed by China Securities Index Co Ltd. The CSI 300 is a diversified index consisting of 300 A-share stocks listed on the Shenzen and/or Shanghai Stock Exchanges. A-Shares represent equity securities of companies incorporated in mainland China. These shares are denominated in Chinese Renminbi (RMB), and trade on the Shenzhen and Shanghai Stock Exchanges.
