The first U.S. exchange-traded fund tracking China’s domestic stocks will lure investors seeking exposure to a broad range of industries in the biggest emerging economy, according to Societe Generale SA’s private bank.
Deutsche Bank AG’s wealth-management unit and Harvest Global Investments Ltd. started trading an ETF in New York yesterday that tracks the performance of the nation’s 300 biggest companies in the Shanghai and Shenzhen stock exchanges. The db X-trackers Harvest CSI 300 rose to $24.80 yesterday.
“There are a lot more domestic companies that are listed in the A-shares market that we as foreign investors cannot touch,” David Poh, the regional head of portfolio-management solutions at Societe Generale’s private bank, said by phone in Singapore today. “Some of them are really good companies listed in Shanghai and Shenzhen that are not listed in Hong Kong.”
China is giving greater access to foreign investors as it promotes usage of its currency worldwide and seeks to revive a stock market that has been among the world’s worst performing major bourses in the past three years. The CSI 300, as well as the Shanghai Composite Index, has fallen 35 percent since the start of 2010.
The ETF will allow investors to tap into Chinese consumer stocks, the best-performing industry group in the CSI 300 over the past three months. A gauge of consumer-discretionary stocks, which accounts for 11.1 percent of the CSI 300, has jumped 12 percent, the most among 10 groups. The Bloomberg China-US Equity Index gained 9.3 percent, while the Hang Seng China Enterprises index of Hong Kong-listed Chinese stocks advanced 9.4 percent.
President Xi Jinping and Premier Li Keqiang are trying to transform China into a consumer-led economy from an exporter reliant on a managed currency. Li has championed urbanization as a “huge engine” for growth as he encourages rural workers to move to cities and boost spending. Communist Party leaders will enter a policy-making summit this week to map out a blueprint for reform.
“With A-shares, you get much more exposure to companies that are more consumers and domestically focused,” Martin Kremenstein, head of Passive Asset Management for Deutsche Asset & Wealth Management Americas, said in a Bloomberg radio interview yesterday. “When you look at the Chinese five-year plan, it was designed to increase consumption. You really do want exposure to consumer stocks and domestically-focused businesses.”
Krane Fund Advisors LLC is also partnering with Bosera Asset Management Co. to offer an A-share ETF on the New York Stock Exchange, according to a Nov. 5 statement. A Kraneshares ETF that tracks mostly Hong Kong companies that will benefit from China’s Five-Year Plan has climbed 17 percent since its July 17 start.
“The new leadership appears focused on implementing a strong foundation to support stable long-term economic growth,” Brendan Ahern, New York-based managing director of Krane Fund Advisers, said in an interview in July.