Daily ETF Watch: China A-Share ETFs Coming

Want even more exposure to mainland China? You got it.

The market for China A-share-focused exchange-traded funds is hopping following the launch last autumn of Deutsche Bank’s db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR | D-50), with two small-cap funds in the loading dock. One will go live tomorrow and another’s launch is right around the corner.

Deutsche Bank is following up its maiden mainland China ETF with another A-shares offering on May 21, the db X-trackers Harvest China A-Shares Small Cap Fund (ASHS). The new fund will invest in the small-cap universe of mainland China securities, and will have an annual expense ratio of 0.82 percent, or $82 for each $10,000 invested.

A-shares are stocks of firms listed in either Shanghai or Shenzhen that are domiciled in mainland China—the final frontier of Chinese equities markets. The shifting focus in Chinese equities comes at a time when growth of the Chinese economy is slowing to single-digit rates compared with the more familiar double-digit growth in past years.

Additionally, Market Vectors updated regulatory paperwork for its proposed China A-shares-focused exchange-traded fund, the Market Vectors ChinaAMC SME-ChiNext ETF (CNXT), detailing an expense ratio of 0.68 percent, or $68 for every $10,000 invested. The inclusion of such details in regulatory paperwork typically suggests a fund is about to launch.

The Market Vectors A-shares fund will track the SME-ChiNext 100 Index, which will have exposure to the performance of small-to-medium capitalization companies trading on the Small and Medium Enterprise Board and the ChiNext Market of the Shenzhen Stock Exchange, the filing said. As of March 31, the index included 100 securities of companies with a market cap ranging between $678 million and $18.2 billion, and a weighted average market capitalization of $3.8 billion.

Apart from the Deutsche’s pioneering A-Shares ETF, ASHR, which now has nearly $150 million in assets under management, two other funds currently canvas the mainland China equities universe: the Market Vectors ChinaAMC A-Share ETF (PEK | F-47), which has $30 million in assets, and the KraneShares Bosera MSCI China A Share ETF (KBA), which has less than $6 million in assets.

Filings

First Trust has put into motion a short-duration mortgage ETF dubbed the First Trust Low Duration Mortgage Opportunities ETF, which will invest in mortgage-related debt securities tied to residential and commercial mortgages.

The fund is coming to market at a time when investors are still grappling for yields in an uncertain rising-interest-rate environment. The Federal Reserve has signaled it will raise rates sooner rather than later in 2015.

The mortgage-backed securities in which the ETF will invest may be, but are not required to be, issued or guaranteed by the U.S. government or its agencies or instrumentalities, such as the Government National Mortgage Association and the Federal National Mortgage Association, according to the filing.

The fund will limit its investments in mortgage-related investments that are not issued or guaranteed by government entities to 20 percent of its net assets, and will target an estimated duration of three years or less.

Associated fees and tickers were not made available in the filing.