| NEW YORK
NEW YORK Nov 5 Foreign investors looking to
access China's onshore market will have a new avenue starting on
Wednesday when Deutsche Asset & Wealth Management launches the
first ETF targeting direct exposure to shares of companies
incorporated in mainland China.
The db X-trackers Harvest CSI 300 China A-Shares Fund, set
to trade under the ticker "ASHR" on the NYSE Arca, will be the
first ETF to directly tap into the "A-shares" market of domestic
Chinese stocks priced in yuan and traded on the giant stock
markets in Shanghai and Shenzhen.
Other ETFs have provided exposure to the A-shares market
through derivatives, not shares. The Market Vectors China ETF
, for example, invests in swaps linked to A-shares.
"The China A shares market is one of the few remaining major
markets that is still somewhat untapped by most global investors
because access to them has been restricted," said Dennis
Hudachek, a senior ETF analyst at IndexUniverse, referring to
Beijing's tight restriction of foreign access to the shares.
Chinese regulators require foreigners to apply for status as
qualified investors, or Renminbi Qualified Foreign Institutional
Investor (QFII or RQFII) status, and decide how much they can
invest by issuing quotas. Recently, regulators in Beijing have
expanded the number of foreign investors allowed to buy
"Transacting in China logistically is more complicated than
in the U.S.," Alex Depetris, chief operating officer of the
Deutsche's exchange-traded products business in the Americas,
said in an interview.
Deutsche has partnered with Harvest Global
Investments Limited, which is a RQFII, and a unit of Harvest
Fund Management Co Ltd, the second-largest asset management
company in China.
"That really enabled us to develop this product as soon as
the RQFII regime started being offered to ETF providers like
us," Depetris said.
ETF watchers will be looking to see if the fund's RQFII
quota level is able to accommodate investor demand, which
Hudachek said will be the real test. Asset managers receive
quotas for a certain amount of investment. Once that is used, a
manager would have to apply for a new quota. That could pose a
problem for an ETF, which must buy more assets as investor money
Depetris said they plan to closely monitor quota levels to
put in for an increased quota should investor demand necessitate
a higher level.
If the new ETF is able to accommodate investor demand, then
the fund "could be a total game changer," Hudachek said.
"There's a lot of money expected to flow into A-shares in the