PowerShares, the fourth-largest U.S. ETF sponsor, is set to launch an actively managed exchange traded fund backed by Chinese A-Shares, which allows investors to gain exposure to China-listed companies.
Through the qualified foreign institutional investor system, foreign investors are able to access Chinese A-shares, which trade on the Shanghai Stock Exchange and the Shenzen Stock Exchange and are typically only available to mainland citizens. A-shares are also only quoted in the Chinese renminbi currency.
Since mainland China's A-Shares listed in Shanghai and Shenzhen are not accessible to most foreign investors, people typically gain exposure to Chinese equities through China index funds and ETFs that hold Chinese companies listed in Hong Kong or New York.
CHNA, though, will not be able to track China A-Shares off the bat as the fund advisor works with Chinese authorities to receive a QFII license.
According to the most recent SEC filing, the ETF will invest in a combination of futures contracts on the FTSE China A50 Index; other ETFs that provide exposure to the largest companies within the China A-Shares market; and it aims to gain direct access to Chinese A-Shares.
Currently, investors can take a look at the Market Vectors China ETF (PEK), which is the only U.S.-listed ETF that provides access to China A-shares through swaps and derivatives. PEK has $34.4 million in assets under management.
Max Chen contributed to this article.