The China A-share ETF was listed today on the Stock Exchange of Hong Kong.
The manager will use a full replication strategy investing directly in A-shares included in the index through the Shanghai-Hong Kong Stock Connect and using an Renminbi Qualified Foreign Institutional Investor (RQFII) investment quota.
According to the firm, most A-share ETFs are passive funds that track the performance of market indices, but the Value China A-Share ETF tracks a customised index.
The index adopts a screening model to identify undervalued stocks with good fundamental quality. The constituent stocks in the index are subjected to valuation, quality and contrarian screenings, Value Partners said.
Companies passing through the screening process are ranked by price-to-earning ratio and 50 companies with the lowest price-to-earnings ratios are selected.
The customised index was launched in 2011 and is rebalanced twice a year.
“As China continues to open up its capital markets, we see increasing opportunities for A-shares to be included in international indices, which will boost the inflow of capital in the long run,” said Cheah Cheng Hye, chairman and co-chief investment officer.
This could lead to a significant expansion in the price-earnings multiples of Chinese stocks in the coming years, Hye said.
China ADRs will be included in the MSCI China index and an assessment for A-shares is coming in June, said Catherine Yeung, investment director for Asia ex-Japan equities at Fidelity Investments, speaking at the FSA Bangkok Investment Forum.
“That will better reflect what were seeing on a global platform. China is still less than 3% of global markets,” Yeung said.
China A-shares have been in focus following the launch the Hong Kong-Shanghai Stock Connect programme in November.
Regulators are separately also working on the Shenzhen-Hong Kong stock connector scheme, which will further widen the access to the onshore China universe.
Aberdeen Asset Management was the latest firm to launch its China A-share dedicated investment strategy on 16 March.
