June 2, 2015 / 5:00 PM / 2 years ago

Vanguard to add China A-shares to its broad emerging markets ETF

NEW YORK, June 2 (Reuters) - Vanguard Group said on Tuesday it plans to add onshore Chinese equities, known as A-shares, to its broad emerging markets exchange-traded fund, making it the first broad-based emerging markets ETF to gain direct exposure to the onshore market.

The Vanguard FTSE Emerging Markets ETF, which has some $50 billion in assets and ranks among the biggest U.S.-listed ETFs, will add the Chinese shares as a part of an expansion of several of Vanguard's international index funds to broader FTSE benchmark indexes, the company said.

China's so-called A-shares are the renminbi-denominated shares of companies incorporated in mainland China and traded on the Shanghai and Shenzhen exchanges. So far only a handful of U.S.-listed China-focused ETFs have direct exposure to the A-shares market.

"The addition of China A-shares ... will provide investors with more complete exposure to a key emerging economy and the second-largest stock market in the world by market cap," Vanguard said, noting that China accounts for some 20 percent of global trade and 7 percent of global consumption.

Vanguard said it recently received a quota for China A-shares, which will provide exposure to the country's largest issuers.

The Vanguard ETF change comes as the Vanguard Emerging Markets Stock Index Fund, of which the ETF is a share class, makes the benchmark change. China A-shares will represent 5.6 percent of the new benchmark for the emerging markets index fund.

The transition to the new benchmarks is expected to begin in late 2015, the company said. (Reporting by Ashley Lau in New York; Editing by Alan Crosby)

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