A-Shares ETFs Pop Before MSCI Announcement

ETF Trends

Shares of the db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) , the largest exchange traded fund offering direct access to Chinese A-shares equities, are higher by 1.3% in late trading on volume that is more than 11% above the daily average of ahead of MSCI’s (MSCI) annual market reclassification announcement this evening.

China’s A-shares, which trade in Shanghai and Shenzhen, are up for a promotion to the MSCI Emerging Markets Index, to which more than $1.3 trillion in global assets are benchmarked. Earlier this year, MSCI said it was in the consulting stages on the potential inclusion of Chinese A-shares equities in the MSCI Emerging Markets Index. [Index Change Could Lift A-Shares ETFs]

MSCI’s inclusion of A-shares in the emerging markets index would be gradual, starting with 5% in 2015, according to the index provider. That would boost China’s weight in the index to over 19% from the current level of 17.2% and if the country decides to fully liberalize its financial markets, it could account for 27.7% of the MSCI Emerging Markets Index.

During Tuesday’s Asian session, an analyst for Shinhan Investment Corp. told Reuters China’s A-shares are more likely to gain emerging markets status than South Korea is to be promoted to developed market territory.

This is the seventh time South Korea has been up for a promotion to developed market status, but observers believe not enough has changed over the past year to warrant South Korea departing the MSCI Emerging Markets Index. [Will South Korea Finally be a Developed Market?]

Earlier this month, MSCI rival FTSE Group introduced a series of indices that will allow market participants to include China A-shares in global indices at a time of their choosing.

Other China A-shares ETFs are also trading higher ahead of the MSCI announcement. The Market Vectors ChinaAMC A-Share ETF (PEK) , which like ASHR offers physical access to A-shares, is up 1.2% on above average volume. The KraneShares Bosera MSCI China A ETF (KBA) , the only A-shares ETF tracking an index from MSCI, is up 1.6%.

The db X-trackers Harvest CSI 500 China-A Shares Small Cap Fund (ASHS) is higher by almost 1.4% though on light turnover. ASHS debuted last month as the first U.S.-listed ETF to exclusively focus on small-cap A-shares.

db X-trackers Harvest CSI 300 China A-Shares Fund

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ETF Trends editorial team contributed to this post.

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