China Asset Management (Hong Kong) Limited (ChinaAMC) has begun serving as sub-advisor for Van Eck’s Market Vectors ChinaAMC A-Share ETF (PEK).
ChinaAMC is a wholly-owned subsidiary of China Asset Management Co, Ltd, China’s largest management company in terms of mutual fund assets under management, and it has received its Renminbi Qualified Foreign Institutional Investor (RQFII) quota, which will allow PEK to have direct exposure to physical China A-shares, providing investors with enhanced access to the Chinese equity markets.
“We are very excited not only to now offer direct exposure to physical A-shares through PEK, but also to be working with an RQFII sub-advisor of ChinaAMC’s calibre,” says Amrita Bagaria, ETF product manager with Market Vectors. “We believe their depth of knowledge of the Chinese marketplace will prove to be invaluable to the fund’s investors, and PEK’s ability to invest directly in the A-Share marketplace makes it an even more compelling investment option for China-focused investors.”
PEK has the longest active track record of any US-listed Chinese A-share equity-focused ETF that is not a closed-end fund, having launched on 13 October 2010. The fund was the first of its kind to offer broad exposure to China A-shares, which represent the largest portion of China’s equity market.
PEK seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the CSI 300 Index, a modified free-float market capitalisation weighted index compiled and maintained 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, representing equity securities of companies incorporated in mainland China. These shares are denominated in Chinese Renminbi (RMB). The fund gains its exposure to the China A-share market by directly investing in China A-shares through ChinaAMC’s A-share quota, which currently amounts to RMB1bn.
Originally open only to domestic citizens of the People’s Republic of China, the A-share market was opened to foreign investors in 2002 via the Qualified Foreign Institutional Investor (QFII) quota programme. In December 2011, the RQFII quota programme was introduced by Chinese authorities and allows Hong Kong subsidiaries of fund management companies and securities houses from mainland China to launch RMB investment products in Hong Kong and to invest in securities listed in mainland China.
“A-shares represent the largest portion of the Chinese equity market as well as the largest segment by market capitalisation of the primary emerging market countries,” says Bagaria. “Through our RQFII sub-advisory relationship with ChinaAMC, we are very excited to enhance PEK’s ability to provide access to the full China growth story by directly investing in shares of local Chinese companies that may be poised to benefit from the country’s rapidly growing middle class.”
PEK will continue to have a gross expense ratio of 2.21 per cent and a net expense ratio of 0.72 per cent, which are capped contractually until at least 1 May 2014. PEK’s net expense ratio is the lowest of any US-listed ETF offering direct exposure to China A-Shares.