The new fund aims to give direct exposure in China A-shares through the sub-advisor’s RQFII (Renminbi Qualified Foreign Institutional Investor) quota. A-shares are companies incorporated in China and trade on the Shanghai and Shenzhen Stock Exchanges. They are quoted in renminbi (yuan) and are only available to domestic investors, Qualified Foreign Institutional Investors (QFII) and RQFII.
The latest credit report from China shows the country has managed to contain the much-talked about crisis in the real-estate sector. Additionally, the manufacturing sector showed evidence of a strong recovery while outbound shipments from the country soared. The efforts of the government to stimulate the economy are slowly starting to bear fruit. Hence, Market Vectors new product comes at an opportune time.
The new fund is the first US-listed ETF investing in China’s small and medium enterprises and high- growth stocks listed in China. Through collaboration with ChinaAMC, one of the largest asset managers in the country, the new fund will invest in physical A-shares while tracking the performance of the SME-ChiNext 100 Index.
The index consists of 100 of the largest and most liquid mid- and small-cap stocks listed and trading on the Small and Medium Enterprise (SME) Board and the ChiNext Board of the Shenzhen Stock Exchange.
The SME Board was established in 2004 and is treated as China’s NASDAQ. It lists mature or maturing small- and medium-sized companies in China. The index is heavily tilted toward information technology and consumer discretionary sectors. Industrials and health care occupy the next slots while financials and energy get minimum exposure. The ChiNext Board, on the other hand, began trading in 2009 and focuses mainly on start-ups and growth companies.
A report by World Trade Organization showed SMEs at the beginning of 2014 contributed 80 percent of the country’s employment, 60 percent of the its GDP and 74 percent of its technological innovation.
CNXT has an annual expense ratio of 0.68 percent and had 95 holdings as of 8/14/2014.
Disclosure: No holdings