China ETFs in the Spotlight as A-Shares Debut on MSCI Indices
This article was originally published on ETFTrends.com.
Chinese markets and country-related exchange traded funds were in the limelight Monday as index provider MSCI added China A-shares to its emerging market benchmark Friday.
The KraneShares CSI China Internet Fund (KWEB) , which includes exposure to some of China’s largest internet and e-commerce names, was among the best performers Friday, rising 2.9%.
The move is seen as beneficial to an array of exchange traded funds, including the VanEck Vectors ChinaAMC SME-ChiNext ETF (PEK) , VanEck Vectors ChinaAMC CSI 300 ETF (CNXT) , iShares MSCI China A ETF (CNYA) and db Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) . These ETFs track China-listed company stocks on the Shanghai and Shenzhen Stock Exchanges. However, these broad China A-shares ETFs remained in the slumps Friday.
"The quantum of dollars right now is relatively small ... but what it does is it starts a process that will include China A shares as a bigger and bigger component of this very important benchmark over time," Jon Howie, head of equity index strategy at BlackRock, told CNBC's "Squawk Box."
Investors widely expect billions of dollars could help support Chinese A-shares ahead as global money managers adjust their positions to better reflect the new emerging market benchmark changes.
Close to 230 China A-shares appeared on index provider MSCI's emerging markets benchmark Friday. The partial inclusion of the A-shares, or yuan-denominated stocks traded on mainland stock exchanges, to MSCI's widely observed Emerging Markets Index will take place in two phases, with the second phase coming in August, CNBC reports.
Once the A-shares are included, China country weight in the index, which currently includes shares of Hong Kong-listed Chinese company stocks, will stand at 31.3 percent. Full inclusion would make A-shares account for 16% of the EM index and push China to 42% of the benchmark.
To put this in perspective, the iShares MSCI Emerging Markets ETF (EEM) , which follows the benchmark MSCI Emerging Markets Index, holds 33.1% China as of June 1.
However, MSCI's actions failed to instigate traders Friday as greater China markets slipped, with the Shanghai composite down 0.5% and the smaller Shenzhen composite 0.9% lower while the Hong Kong's Hang Seng Index dipped 0.2%.
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