Van Eck said in January that the Market Vectors China ETF (PEK | F-49), which formerly invested in Chinese securities via derivatives, would be taking a direct route to the Chinese A-share market by owning actual stocks going forward.
Controls imposed by the Chinese government currently limit direct investments in A-shares, so only a limited pool of foreign investors have been approved as qualified foreign institutional investors by the China Securities Regulatory Commission. Market Vectors partnered with China Asset Management (Hong Kong) Limited, which has received its renminbi qualified foreign institutional investor quota of 1 billion RMB ($163.8 million), allowing PEK to have direct exposure to physical China A-shares.
Previously, PEK, which launched in October 2010, was marketed as the first fund of its kind to offer broad exposure to China A-shares via derivative securities using Credit Suisse as a partner. The use of derivatives exposes investors to the inherent risks of any equity investment, plus so-called counterparty risks associated with use of over-the-counter derivatives.