Daily ETF Watch: New China A-Shares ETF

January 29, 2014

Yet another ETF focusing on China A-shares is in the works.

Exchange Traded Concepts is looking to bring to market a China A-shares-focused fund, the latest addition to a growing list of funds focused on a new frontier to the second-biggest market in the world.

The A-shares market is in some ways considered to be the next great frontier of investing in the world’s No. 2 economy. The fund would build on the initial success of the db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR), which launched with $108 million in November.

The new proposed offering, dubbed the CSOP Source FTSE China A50 ETF, will track the FTSE China A50 Price Index, which comprises the 50 largest companies in the China A-shares market, according to a regulatory filing, which listed no ticker or expense ratio.

A-shares are equity securities issued by companies incorporated in mainland China and are denominated and traded in renminbi on the Shenzhen and Shanghai stock exchanges. Foreign investors can invest in the domestic Chinese securities market only through certain foreign institutional investors that have obtained status as a qualified foreign institutional investor or a renminbi qualified foreign institutional investor (RQFII).

CSOP Asset Management Limited, the fund’s subadvisor, has been granted an undisclosed RQFII quota for the fund’s investment, according to the filing.

Filings

J.P. Morgan Investment Management has filed regulatory paperwork to gain the option of making use of two popular trends now spreading through the ETF industry: self-indexing; and master-feeder fund structures.

The firm is seeking permission to launch ETFs in master-feeder structures, self-indexed equity and fixed-income funds, long/short funds and 130/30 funds. Also, the firm has filed paperwork seeking permission to launch fund of funds.

The trend toward launching ETFs via master-feeder structures would make a given ETF part of a much broader and essentially identical “master” portfolio. The concept is being explored by a number of other firms including Fidelity and Van Eck—and more recently, SSgA. Also, Vanguard currently has a patent that allows its ETFs to be a separate share class of identical mutual funds.

The move to self-index would allow J.P. Morgan to bring strategies to market more quickly and, potentially, at less cost than it would incur using a third-party index firm.

 

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