New ETF Grants Access to A-Shares Small-Caps

ETFtrends.com

Looking to capitalize on the success of the db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) , Deutsche Asset & Wealth Management today launched the small-cap equivalent of ASHR, the db X-trackers Harvest CSI 500 China A-Shares Small Cap Fund (NYSEArca:ASHS) .

ASHS tracks the CSI 500 Index of Shanghai- and Shenzhen-listed small-caps. The new ETF charges 0.82% per year.

Deutsche’s partnership with Harvest Fund Management, China’s second-largest asset manager, is a key element in the bank being able to offer an A-shares ETF that holds actual equities. Harvest is a Renminbi Qualified Foreign Institutional Investor (RQFII), which means it meets Chinese regulatory requirements to be a foreign owner of A-shares. [A-Shares ETF Comes to Market]

Due to restrictions on foreign ownership of A-shares, China is far behind other large markets, both developed and emerging, in terms of foreign ownership of its equities. Even including Chinese stocks listed in Hong Kong or New York, foreign ownership of Chinese stocks was just 11.4% at the end of 2012, half the level seen in Japan and barely more than 20% of foreign ownership of German stocks.

Foreign investors’ access to China’s A-shares has been limited, but in a bid to attract more foreign investment, the government there moving toward approving RQFII status for more asset managers. [A-Shares ETFs Increase Access to China]

The new ASHS is the fifth A-shares ETF to list in the U.S. and the fourth to offer physical access to A-shares. ASHR, which has $147.8 million in assets under management, was the first U.S-listed ETF to offer direct access to A-shares equities.

ASHS allocates no more than 0.71% to any of its holdings and the ETF’s top-10 holdings combine for less than 6% of the fund’s weight. To be considered for inclusion in the index, securities must meet minimum liquidity requirements, according to a statement issued by Deutsche Asset & Wealth Management.

Industrials are the largest sector weight in ASHS at nearly 24.5%. Consumer discretionary follows at almost 17.2% while materials and technology combine for nearly 29%.

ASHS is Deutsche Asset & Wealth Management’s third China ETF to list in the U.S. The firm recently launched the db X-trackers Harvest MSCI All China Equity Fund (CN) .

db X-trackers Harvest CSI 500 China A-Shares Small Cap Fund Index Weights

 

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Chart Courtesy: Deutsche Asset & Wealth Management

ETF Trends editorial team contributed to this article.

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