May 15, 2015 / 2:56 AM / 3 years ago

China asset firm offers first ChiNext ETF to foreign investors

HONG KONG, May 15 (Reuters) - Chinese asset management firm CSOP Asset Management launched the first renminbi exchange-traded fund (ETF) tracking Shenzhen’s ChiNext index on Friday, providing foreign investors with a new channel to diversify their portfolios.

The fund that invests in the 100 biggest companies listed on the ChiNext in terms of market value, or 47 percent of the total, makes use of CSOP’s Renminbi Qualified Foreign Institutional Investors (RQFII) quota.

Before this fund, most RQFII ETFs track major stock indices in China’s equity market, such as CSOP A50 ETF which follows the 50 biggest blue chip companies and China AMC CSI300 ETF that follows the 300 largest and most liquid stocks in China.

“Asset allocation demand has become more complicated, as investors are not content with having access to China, but hope to secure returns from more balanced asset categories,” said Jack Wang, head of institutional clients at CSOP Asset Management.

Wang believes this fund will see demand from both long-only funds that want to have more exposure to China as well as investors who are interested in shorting the ChiNext index which has more than doubled so far this year.

The Nasdaq-style ChiNext, a high-growth enterprise board, has consistently outperformed the Shanghai Exchange which has concentrated on listing large-cap blue chip firms in recent years.

The fund comes at a time when a stock link between Shenzhen and Hong Kong is scheduled to be launched later this year and market participants are seeking ways to bet on the new connector.

The Shenzhen-Hong Kong stock connect will include representative stocks from the main board, the small, medium-sized enterprises board and the ChiNext growth board, the general manager of the Shenzhen Stock Exchange said in March.

The CSOP ChiNext ETF is the first fund that allows foreign investors to purely track the ChiNext index. Last year, China AMC and U.S. ETF provider Van Eck listed an ETF tracking Shenzhen’s SME-ChiNext100 index in New York.

China rolled out the RQFII scheme in 2011 as an initiative to offer overseas investors a way to invest in its domestic markets with the yuan currency. CSOP is the biggest RQFII player with a total quota of 46.1 billion yuan ($7.43 billion).

$1 = 6.2045 Chinese yuan Reporting by Michelle Chen; Editing by Jacqueline Wong

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