Van Eck Global has launched the Market Vectors China ETF, a U.S.-listed exchange-traded fund that tacks the performance of the CSI 300 Index from China Securities Index Co. to give investors exposure to the A-shares traded on China’s two main exchanges in Shanghai and Shenzhen. These shares account for 72% of China’s equities, whereas H-shares, or shares traded on lesser exchanges in Hong Kong and elsewhere, account for 13% of China’s total equity market.
However, the fund will not invest directly in the A shares at the outset, but in swaps and derivatives that have characteristics similar to the securities.
China’s A-share market has historically been restricted to Chinese and qualified foreign institutional investors, Van Eck noted. The company also pointed out that many international investment products consider market weightings over gross domestic product, and that in June 2010, China supplanted Japan as the second-largest economy in the world after the U.S.
“Because of its size and growth, we believe effective diversification requires investors to have broad exposure to China and this, in turn, requires exposure to A-Shares traded on the Shanghai and Shenzhen exchanges,” said Jan Van Eck, a principal of the firm.