Daily ETF Watch: China ‘Paper’ Fund Live

KraneShares, the exchange-traded fund firm focused exclusively on China’s huge economy, today broke new ground on behalf of U.S. investors with the launch of a commercial paper ETF that’s denominated in renminbi.

The KraneShares E Fund China Commercial Paper ETF, which will trade with the ticker “KCNY,” will be built around an index of investment-grade on-shore renminbi-denominated commercial paper issued by sovereign, quasi-sovereign and corporate issuers in the People’s Republic of China and traded in the interbank bond market. That latter aspect, the “interbank bond market,” is crucial to the extent that much of the fixed-income action in China takes place in the interbank market, meaning the new ETF will have built-in liquidity.

In broad terms, KraneShares’ launch of KCNY is part of a bigger trend of deepening access for foreign investors to China’s markets. The country has the second-biggest economy in the world, and few doubt that one day it will have the biggest. But access to its markets remains less than perfect for foreigners, as the limitations of different ETF concepts has made clear in the past few years. But with each new innovation, including "KCNY," theory and reality are converging.

The groundbreaking fund comes with an annual expense ratio of 56 basis points, or $56 for each $10,000 invested, according to KCNY’s latest updated prospectus filed with the Securities and Exchange Commission.