Source and CSOP first to offer direct access to chinese a-shares via ETF

Source and Hong Kong-based CSOP Asset Management (“CSOP”) are pleased to announce the launch of the CSOP Source FTSE China A50 UCITS ETF.  The fund is the first to offer direct exposure to the China A shares market in Europe. ……

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It trades on the London Stock Exchange and will be available to both retail and institutional investors. As a result of strong demand for the fund, initial orders for RMB 1.42 BN (US$230MM) were received on Friday January 3rd and now represent the assets under management of the fund.

The A shares market is widely viewed as the most authentic Chinese equity market. A shares are shares of mainland Chinese companies, traded on mainland Chinese exchanges and denominated in Chinese renminbi (RMB). This market represents over 4% of the global equity market (1) but has been difficult to access, particularly for smaller investors.

The CSOP Source FTSE China A50 UCITS ETF invests directly in A shares under the Renminbi Qualified Foreign Institutional Investor (RQFII) quota scheme. Investors with RQFII status may, within their allocated quota, buy and sell A shares freely. Hong Kong-based CSOP is currently the largest RQFII manager of A shares globally and has been granted quota specifically for the CSOP Source FTSE China A50 UCITS ETF.

“We are delighted to be partnering with Source to create a European ETF,” says Chen Ding, CEO of CSOP. “There has been high demand for our Hong Kong-listed ETF and we expect similarly strong interest from Europe.” CSOP’s existing FTSE China A50 ETF (2822 HK), listed in Hong Kong, is the largest and most actively traded RQFII ETF, with assets of RMB 21 billion (2)
The ETF aims to track the performance of the FTSE China A50 Index, which comprises the top 50 companies in mainland China. The index is a recognised benchmark for A shares and has been calculated by FTSE since 2003.  “The FTSE China A50 index is an ideal choice for an ETF benchmark,” says FTSE CEO Mark Makepeace. “It offers a good balance between market representation and investability and has already attracted US$ 9.5 billion in A shares assets (3).

“This ETF represents a milestone for European investors,” adds Source CEO Ted Hood. “It allows all investors – not just large institutions with their own investment quotas – to invest directly in one of the world’s most important equity markets. CSOP’s knowledge of the Chinese market and their experience managing RFQII ETFs allow us to offer an efficient, well-structured product.” 

The ETF is denominated in RMB and trades on the London Stock Exchange in USD and GBP. Investors will be exposed to fluctuations in the exchange rate between RMB and the currency in which they are trading.

Key partners who have been vital to the creation and future functioning of the ETF include HSBC (custodian), London Stock Exchange (listing), Bank of America Merrill Lynch, Flow Traders, Goldman Sachs, J.P. Morgan and UBS (authorised participants and market makers in the fund) and the Maples and Calder (legal counsel). Source would like to acknowledge the assistance of the Irish Fund Industry Association (IFIA).

Key product terms

1 In USD terms, as at 30 November 2013

2 As at 6 December 2013

3 Hong Kong listed ETPs, FTSE data as at 8 November 2013

Source: ETFWorld.co.uk