Invesco has rolled out a new ETF in Europe providing exposure to the whole gamut of China share classes.
The fund provides comprehensive Chinese equity exposure by investing across all of China’s share classes.
The Invesco MSCI China All Shares Stock Connect UCITS ETF has listed on LSE in US dollars (MCHN LN) and pound sterling (MCHS LN) and comes with an expense ratio of 0.35%.
The fund invests across all Chinese share classes – A-shares, B‐shares, H‐shares, Red‐chips, P‐chips, and foreign listings such as S-chips and N-shares – delivering a more complete representation of China’s economy.
The fund is referenced to the MSCI China All Shares Stock Connect Select Index, which it tracks using direct physical replication.
Exposure to A-share companies is achieved through the China-Hong Kong Stock Connect programme which, subject to trading quotas, allows international investors to trade securities listed on the Shanghai and Shenzhen exchanges and mainland investors to trade securities listed on the Stock Exchange of Hong Kong.
‘Broad opportunity set’
Gary Buxton, Head of EMEA ETFs at Invesco, said: “Despite China being one of the largest and fastest-growing economies in the world, its capital markets have always been difficult for international investors to access. There are many different types of share classes, some listed onshore and others offshore, and not all are available to everyone. The MSCI China All Shares Stock Connect Select Index provides exposure to the broad opportunity set, and we are delighted to bring to market the first UCITS ETF tracking this important index.”
Chris Mellor, Head of EMEA ETF Equity and Commodity Product Management at Invesco, added: “The Stock Connect programme went a long way to provide foreign investors access to the equities listed on China’s two largest stock exchanges. These companies have the greatest exposure to domestic growth, which we think could be attractive given urbanization, a rising middle class, and other demographic trends. By tracking this new index, our ETF provides the full weight of these important stocks along with global growth opportunities from Chinese stocks listed offshore. We believe our ETF offers the broadest and truest representation of China’s vast economy.”
Total exposure
The MSCI China All Shares Stock Connect Select Index is constructed by first excluding all China A-shares from the parent MSCI China All Shares Index.
Stock Connect listings of excluded Chinese A-shares are then re-added to the index if they are available to both buy and sell under the Stock Connect program and the company satisfies total and float-adjusted market capitalization thresholds. As of the end of January, the index contained 697 constituents, down from 743 in the parent universe.
Constituents are weighted according to the float-adjusted market capitalization that is applicable to foreign investors – in the case of A-shares, the calculation uses the price of Stock Connect listings based on the offshore RMB exchange rate.
Listings in Mainland China and Hong Kong each account for about two-fifths of the portfolio with stocks traded in the US contributing about one-fifth.
Consumer discretionary stocks currently account for about a quarter (26.8%) of total exposure with the next largest sector weights being financials (15.5%), communication services (15.0%), consumer staples (9.3%), and health care (8.1%).
Income is accumulated.