The Market Vectors ChinaAMC A-Share ETF sponsored by Van Eck Global, has surpassed USD100m in AUM. The fund was introduced in 2010 as the first ETF to offer investors access to the China A-shares market.
On 31 March, 2015, PEK received a 5-star Morningstar rating on a three-year and overall basis.
“With significant reforms under way and an economy that has decelerated but continues to outpace much of the world, we believe China deserves a fresh look from investors,” says Jan van Eck, Chief Executive Officer at Van Eck Global. “We believe that there is an underlying assumption by US investors that China currently represents some kind of systemic risk,” he said. “The causes are generally ascribed to slowing growth, a real estate bubble, overcapacity in one industry or another, or unsustainable levels of debt. While there are challenges, we observe that the country is further along in working through these issues than is commonly recognised.
“One of the major concerns about China has been local government debt and so-called ‘shadow loans’ – cities getting bank loans through companies that they owned and they borrowed money from, off budget. About a year ago, the central government moved to put a stop to this and replace it with a municipal bond market. Subsequently, there have been about ten major municipal issues all trading at the same or similar credit rating as the central government. All of that debt has to appear on the books of the local government now1. So there has been a move towards transparency, which may mitigate some of the concerns over debt.”
Van Eck notes that there are multiple reforms underway in the financial sector as well: reining in “gray market” loans; removing restrictions on commercial bank lending; developing a more formal, transparent corporate bond market; and reinvigorating the equity markets, including the market for initial public offerings (IPOs).
“By some measures, China is currently the largest economy in the world, so putting in place these kinds of economic and financial reforms takes time,” says van Eck. “However, we believe these reforms are beginning to be priced into the market. The recent rally in Chinese equities suggests to us that other investors are starting to come to a similar conclusion.”