DeAWM and Harvest to introduce Europe’s first physical ETF on China’s CSI300 ‘A-shares’ Index

07 January 2014   Category: News, Asia, China, Europe, United Kingdom, Germany   By Asia Asset Management

Deutsche Asset & Wealth Management (DeAWM) and Harvest Global Investments Limited are set to launch Europe’s first direct, physical replication ETF tracking China’s CSI300 ‘A-shares’ Index.

The db x-trackers Harvest CSI300 Index UCITS ETF (DR) is available for investment from January 7 and will list on the London Stock Exchange and the Deutsche Börse on January 16. It is the first UCITS-compliant direct replication China A-shares fund on the CSI300, and the first of its kind to be given such approval by a European regulator. It follows the successful listing of a db X-trackers physical ETF tracking the CSI300 Index in New York in November, which represented the first direct replication A-shares ETF to be listed outside of China. The US-listed fund has generated significant interest and has quickly garnered strong inflows – the fund raised over US$100 million in initial investment, and by the end of 2013 had broken the $200 million in assets mark.

Reinhard Bellet, DeAWM’s head of passive asset management, commented: “Providing investors with the first European direct investment ETF on China’s key A-shares equity benchmark is a major achievement, and can be seen as a significant step in opening up the world’s second largest economy to European investors.”

The CSI300 Index tracks the performance of the 300 largest and most liquid A-shares stocks.

A number of types of securities provide investors with exposure to the performance of Chinese companies. ‘H-shares’, for example, are Chinese company securities listed on the Hong Kong Stock Exchange that are priced in Hong Kong dollars and which can be freely traded by non-Chinese investors. A-shares are listed on the Shanghai and Shenzhen stock exchanges, trade in Chinese renminbi and are subject to foreign ownership restriction. However, they are generally regarded as the equities that most comprehensively represent the Chinese economy – A-shares represent over 75% of Chinese equity market capitalisation, covering more than 2,000 companies across all industry sectors.

Only foreign investors approved by China’s regulator as Qualified Foreign Institutional Investors (QFII) or Renminbi Qualified Foreign Institutional Investors (RQFII) can invest in A-shares. Harvest Global Investments Limited is a subsidiary of Deutsche Bank’s Chinese asset management joint venture, Harvest Fund Management Co. Ltd, and has RQFII status, which grants it an A-shares quota.

Choy Peng Wah, chief executive of Harvest Global Investments Limited, commented: “The listing of our physical replication ETF tracking the CSI300 Index in the United States has been rightly seen as ground breaking, and we are pleased to follow this up by bringing this opportunity to European investors under the UCITS regime.”

With over $50 billion in assets under management globally, the Harvest Group is one of the oldest and most established asset management firms in China. As well as managing the largest China bond fund in Europe, the Harvest Group also manages the world’s largest physical replication China A-Shares ETF, the Harvest CSI300 Index ETF, which is listed in China and currently has approximately $5 billion in assets.

In July 2012 DeAWM listed Europe’s first ETF providing exposure to the CSI300 Index. The indirect replication ETF has been highly successful, with currently around $950 million in assets under management. The new direct replication offering will appeal to additional segments of the investor base, and is an innovative first new addition to DeAWM’s widening pool of physical replication ETFs – DeAWM announced in December that it would convert a number of its current ETFs from indirect to direct replication, thereby becoming one of Europe’s largest providers of physical ETFs.