New ETF first in US giving foreign investors exposure to Chinese shares

Foreign investors looking to get access to China's onshore market have a new avenue, with Deutsche Asset & Wealth Management yesterday launching the first ETF with direct exposure to shares of companies listed on the mainland bourses.

The db X-trackers Harvest CSI 300 China A-Shares Fund, trading under the ticker ASHR on the NYSE Arca exchange, is the first exchange-traded fund to directly tap into the A-share market of Chinese stocks priced in yuan and traded in Shanghai and Shenzhen.

Other ETFs have provided exposure to the A-share market through derivatives, not shares. The Market Vectors China ETF, for example, invests in swaps linked to A shares.

"The China A-share market is one of the few remaining major markets that is still somewhat untapped by most global investors, because access to them has been restricted," said Dennis Hudachek, a senior ETF analyst at IndexUniverse.

Deutsche has partnered with Harvest Global Investments, which is a renminbi-qualified foreign institutional investor, and a unit of Harvest Fund Management, the second-largest asset management company in China.

ETF watchers will be looking to see if the fund's RQFII quota is able to accommodate investor demand, which Hudachek said would be the real test.