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China A Shares continue to surge on market liberalisation and increased investor appetite

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As ETF Securities marks the one-year anniversary of its China A Shares ETF, the China A Shares market continues to rally due to a combination of financial market liberalisation, policy easing and investor appetite. 

A number of exogenous events are expected to be supportive for both China’s domestic equity market and its role in the global economy.  MSCI is due to evaluate the inclusion of China A-Shares in its Emerging Markets Index this June. A catalyst for inclusion could be the opening of the Shenzhen- Hong Kong Stock Connect which will complement the recently opened Shanghai – Hong Kong Connect. In addition, the International Monetary Fund is due to conduct its five-yearly Special Drawing Rights (SDR) basket review this October or November. The inclusion of Renminbi could become a trigger for significant currency market liberalisation and a seismic shift in the role of the Chinese currency in international trade and finance.

Working in partnership with E Fund Management (Hong Kong) Co, Limited, ETF Securities launched its ETFS-E Fund MSCI China A GO UCITS ETF one year ago, with it becoming Europe’s first physically replicating UCITS ETF tracking the MSCI China A Index. Until recently, foreign investors have had limited access to China’s domestic equity markets, as most  investors were only able to gain exposure through a limited number of Chinese stocks listed on overseas markets such as the Hong Kong and New York stock exchanges.

Commenting, Howie Li, Co-Head of CANVAS, ETF Securities (UK) Limited, says: “The Chinese government committed to accelerating economic reform and financial liberalisation in 2013 and we are beginning to see real progress reflected in the A shares market. China’s presence in global equity benchmarks is still low relative to the size and importance of its economy and this has led to the country tending to be underweighted in the majority of investors’ portfolios. We launched our China A Shares ETF last year to address this imbalance and to give investors low cost, direct access. The product now has a one year track record and has delivered a 108.9 per cent performance in US Dollar terms since listing. The fund performance has benefitted from the unprecedented pace of Chinese capital market liberalisation, a trend that could continue for the course of coming years.”

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