US asset manager Van Eck has unveiled the first US-listed ETF providing exposure to the China A-shares market.
The Market Vectors China ETF, listed on NYSE Arca, invests in stocks traded on China's two main exchanges in Shanghai and Shenzhen.
The fund replicates the CSI 300 index, which captures around 64% of the total market capitalisation of the two exchanges.
The new Van Eck fund tracks the index by using a swap with a counterparty to return the performance. As of 30 September, the index comprises 38% small and mid-cap stocks and 62% large-cap stocks.
Due to foreign investor restrictions, China's local A-shares market has historically been restricted to domestic investors and Qualified Foreign Institutional Investors. Consequently, many emerging market and BRIC funds have not been able to include the A-shares market.
In Europe, Credit Suisse launched an A-shares ETF, while db x-trackers released an A-shares ETF on the Singapore exchange, which is also Ucits compliant.
In total, there are 24 China A-shares based ETFs listed on the Hong Kong Stock Exchange, which all use derivatives to replicate index performance.
Other funds tend to get exposure to China by investing in H-shares, stocks listed on the Hong Kong Stock Exchange. However, H-shares account for just 4% of all emerging market equities and 13% of China's total equity market, according to Van Eck.
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