Europeans see exchange-traded product as a vehicle to invest in the mainland
The doomsayers may be forecasting a hard landing for the Chinese economy but western financial institutions are having none of it.
On the same day that the London Stock Exchange (LSE) opened a regional office in Hong Kong to great fanfare and fine words from Financial Secretary Henry Tang Ying-yen and the visiting lord mayor of London, Robert Finch, Barclays Global Investors (BGI) showed that it, too, was bullish on China. IShares FTSE/Xinhua China 25, which BGI launched on the LSE last Monday, is the first exchange-traded fund with exposure to China available in Europe.
At the risk of serving up a bowl of alphabet soup, a word or two of explanation and a few abbreviations are probably in order here.
BGI is the world's largest provider of exchange-traded funds (ETFs). These are open-end, index-tracker funds that are bought and sold like ordinary shares on a stock exchange and trade at prices very close to their net asset value (NAV) per share. That can make them relatively better value than managed funds, which often trade at a discount to their NAV. They are used as a tool by investors to gain diversified exposure to a market.
For retail investors, ETFs are a flexible, cheaper alternative to mutual funds and for institutional investors, they offer a chance to balance their traditional portfolios with relatively stable exposure to unusual indices.