Hong Kong, 27 July 2015 - GF International Investment Management Limited (GFI) today announced the launch of the GFI MSCI China A International ETF (the ETF), which tracks the MSCI China A International Index. It is the first ETF in Asia to track the index, which is composed of China A-shares and was launched in June last year as a precursor to the inclusion of A shares in MSCI's influential Emerging Markets Index.
GFI MSCI China A International ETF provides international investors with low cost, comprehensive access to the exciting growth opportunities of China's A share market. The ETF was approved by the Securities and Futures Commission of Hong Kong on 16 July 2015, and is expected to be listed on the Hong Kong Stock Exchange on 29 July 2015.
"We are proud to be first to market in Asia with this pioneering ETF, which provides international investors with low cost access to China's dynamic A share market," says Nathan Lin, GFI chief executive."Supported by our leading parent firm, GFI acts as a bridge connecting international investors and China's markets and Chinese investors and international capital markets. This product is a milestone in GFI's development, and is one part of our strategy to sustainably develop products that provide overseas investors with innovative ways to achieve their investment goals."
The ETF is physical in nature and is designed to closely represent the investment opportunity of China's A-share market. The MSCI China A International Index tracks the portion of A shares that are accessible to international investors, and it captures the A-share component of the MSCI China All Shares Index. The new index expands MSCI's family of indexes covering China's equity markets. It is constructed using the MSCI Global Investable Market Indexes Methodology. With no fixed number of index constituents, the free-float adjusted market capitalization weighted MSCI China A International Index is able to more readily reflect ongoing market expansion.
China is the world's second largest economy in terms of GDP, which makes it too big to ignore. However, although A-shares comprise some 34% of the total China investment opportunity set, they are often missing from institutional investor portfolios. Investors cite accessibility as a major stumbling block to the greater inclusion of A shares in their portfolios.
"MSCI China A International Index, launched in June 2014, represents the A share component of the MSCI EM benchmark when full inclusion happens. It demonstrates MSCI's commitment to China, which is currently one of the largest and most liquid markets in the world with foreign participation of less than 2 percent," said Rene Veerman, Managing Director, Head of Hong Kong & Taiwan, MSCI.
The ETF is tradable in the same time zone as the market it tracks and gives investors the flexibility to add exposure at their own pace ahead of the inclusion of A shares in the MSCI Emerging Markets Index, which many observers expect will happen in the near future. Moreover, Hong Kong is a low tax environment. ETFs traded there are exempt from stamp duty and there is no capital gains tax in Hong Kong.
China's A shares have historically exhibited low correlation to other asset classes and geographies. The inclusion of assets with low correlation in portfolios increases diversification, which can help reduce the volatility of returns. Importantly, the ETF's expense ratio is at 0.80% per annum, compared with the average of above 1.12% for the A share ETFs listed globally.
Commenting on the new fund launch, Azra Lau, Director, Head of Exchange Traded Funds, GFI, said: "China's long term growth story is a once in a lifetime event, yet many investors are under-exposed. We are committed to helping investors access the country's dynamic economy through a cost-effective vehicle. MSCI's indexes are among the most respected and widely used benchmarks in the financial industry, with over 80% of institutional investors using them.
As the inclusion of A shares in the MSCI Emerging Markets Index draws closer, investors benchmarking the index, especially pension funds, insurers, asset managers, sovereign wealth funds and endowments will need to rebalance; this product gives them the opportunity to increase their exposure in a controlled, flexible way."