FTSE Russell has launched a new index including both Chinese and Hong Kong companies.
The new index has been licensed by Deutsche Bank for ETFs listed on London Stock Exchange and Deutsche Börse.
The FTSE China A-H 50 index will track the largest 50 China A share companies by market capitalisation but will invest in the lowest-priced share class between the A and H share classes.
It will also select one share class to represent each company with the selection to be done every quarter.
H shares are listed on the Hong Kong Stock Exchange and are mainly available to non-Chinese investors, while A shares are listed on the Shanghai exchange and are largely available only to domestic investors. A shares are not currently included in FTSE’s standard global benchmarks.
FTSE Russell chief executive Mark Makepeace says: “FTSE Russell has a long track record of working in China, and is the most active benchmark provider supporting international investment in the region.”
So far, the firm has been providing access to the FTSE China 50 Index and FTSE China A50 Index for both domestic and foreign investors.
Makepeace says: “As the Chinese domestic market opens, we continue to develop products that provide investors with a variety of tools to capture different aspects of the market. The FTSE China A-H 50 Index reflects our desire to create new index solutions for the region, as we look to support the diverse range of investment needs.”
In February, the People’s Bank of China moved permanently to daily open-market operations to make its liquidity management “better targeted and more efficient”. The PBoC previously conducted open market operations twice a week on Tuesdays and Thursdays.
Using the new index, Deutsche Bank has launched the DBx-trackers Harvest FTSE China A-H 50 Index UCITS ETF, which will be managed by Harvest Global Investments.
The tracker has an annual fee of 0.65 per cent.
“This is the first ETF of its kind listed in Europe,” says Marco Montanari, Deutsche Asset Management’s head of passive asset management for Asia-Pacific.
“The pricing differential between the A-shares and H-shares markets may relate to factors such as capital control measures in the Chinese onshore A-shares market, and differences in the investor base. In the long run the price differential may close as China’s capital markets open up, but in the meantime our new ETF is a straight forward way for investors to maintain exposure to the ‘cheaper’ share class of dual-listed companies on an ongoing basis.
“And if the gap does close over time then those investors that have automatically had ongoing exposure to the lower-priced share classes will benefit.”