NEW YORK, April 30 U.S. investors starting on Wednesday will be able to use a single exchange-traded fund to invest in China's onshore and offshore equities markets when Deutsche Asset and Wealth Management launches the first U.S.-listed ETF with broad exposure to multiple China share classes.
The new db X-trackers Harvest MSCI All China Equity Fund , set to begin trading Wednesday on the NYSE Arca, will be roughly 50 percent in China's mainland A-shares by investing in Deutsche's db X-trackers Harvest CSI 300 China A-Shares Fund , with another 23.5 percent in Hong Kong-listed H-shares, and the remainder in smaller allocations to other share classes, including those listed abroad.
"We see it as a natural extension of the idea of opening up China to investors," said Martin Kremenstein, head of U.S. ETFs for Deutsche Asset and Wealth Management, a division of Deutsche Bank AG, referring to the new "All China" ETF. "The first one (ASHR) was to open up a previously inaccessible part of the market, and this one is now bringing it into a broader China exposure, not just onshore, but offshore as well."
Deutsche, which has about $11 billion in assets under management on its U.S. platform, was the first U.S. ETF provider to offer direct access to China's A-shares market with its db X-trackers Harvest CSI 300 China A-Shares Fund in November.
The new "All China" fund builds off that first fund, which now has about $143.5 million in assets, by gaining its A-shares exposure through investment in the fund.
The fund seeks to track the MSCI All China Index, which includes large- and mid-cap Chinese securities listed in China and Hong Kong, as well as in the United States and Singapore. The new ETF will be priced at around 71 basis points, according to Kremenstein.
Deutsche is one of a handful of U.S. ETF providers launching funds tied directly to China's mainland A-shares market, which is largely restricted to foreign investors. Van Eck Global also has a Market Vectors ChinaAMC A-Share ETF, and boutique China ETF firm KraneShares has its Bosera MSCI China A Share ETF that allow investors to directly access China A-shares. All three ETF providers have plans to launch more of such funds, according to filings with the U.S. Securities and Exchange Commission.
Those existing A-shares ETFs, however, are more narrowly focused on the China A-shares market alone, rather than incorporating other offshore share classes into the funds, as the new Deutsche ETF does.
"We think this will be able to play a part in investors' portfolios as they allocate to China in a broader way," Kremenstein said. "The more you can package up exposures into one wrapper, the more useful a fund it becomes for investors." (Reporting by Ashley Lau in New York; Editing by Chris Reese and Chizu Nomiyama)