KraneShares, the China-focused ETF firm, plans to launch a first-of-its-kind fund that would target companies operating in China’s clean energy industry. The KraneShares NYSE Bloomberg China Clean Energy ETF will gain access to A-shares by either using the new Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programs or investing in the B-shares of companies that also trade as A-shares.
The underlying index covers approximately 75 securities, with significant concentrations in the industrial, information technology and utilities sectors. Those components are weighted by a combination of free-float market capitalization and their exposure to the clean energy industry. That means that with a capitalization range of $142 million to $24 billion, the smaller companies are less likely to be overwhelmed by the larger companies.
China has a massive pollution problem, so massive in fact, that “Pollution in China” gets its own Wikipedia entry. As the most populated country on earth, which is still in the throes of industrialization and on track to become a developed market, China is likely to come under greater external and internal pressure to address its environmental issues. Its clean energy-focused companies will be perfectly poised to benefit from that shift when it happens.
China’s “Connect” programs enable investors to trade a selection of A-shares listed on the Shanghai or Shenzhen stock exchanges on the Hong Kong Stock Exchange, bypassing the need for a RQFII or QFII designation, which was previously the primary way foreign investors could gain direct access to the A-shares market. The Shanghai program launched last year, while the launch of the Shenzhen program is still pending.
The KraneShares fund is slated to list on the NYSE, but the filing didn’t include a ticker or expense ratio.