KraneShares, known for its China-focused investment strategies, has made its ETF debut in Germany by cross-listing six funds onto Deutsche Börse Xetra.
Five of the ETFs deliver diverse access to the Chinese stock market, including traditional A-share exposure as well as more focused strategies on certain industries and investment themes.
The sixth ETF, meanwhile, is a globally diversified thematic fund targeting companies within the electric vehicle and future mobility sector.
The funds, which are already listed on London Stock Exchange, are also expected to roll out on Borsa Italiana at the end of this week.
Commenting on the firm’s push into Germany, Xiaolin Chen, Head of International at KraneShares, said: “By listing these six UCITS ETFs on Deutsche Börse Xetra, we’re pleased to offer German investors the opportunity to access companies that we consider to be China’s industry frontrunners and instrumental in propelling China’s growth trajectory for the decades ahead.”
Jonathan Krane, CEO of KraneShares, added: “Germany represents a key strategic growth market for KraneShares. We believe investors in the region have a strong affinity for investing in China, and our UCITS ETF range, which includes themes like China internet, electric vehicles, clean technology, China A-Shares, fixed income, and more, represents a differentiated approach to gaining exposure to the world’s second-largest economy.”
After decades of stellar growth, China has been dogged by economic problems in 2023 including a deepening real estate crisis, consumer price deflation, falling exports, and soaring youth unemployment. China’s stock market, as measured by the MSCI China Index, has consequently experienced a sell-off and is down 7.29% year-to-date (data as of the end of September).
While recent government stimulus is showing positive early signs of feeding through into the economy, the volatile economic environment has led many investors to be more cautious when investing in the Asian superpower. Amid this backdrop, investors may wish to consider more specialized and niche China-focused strategies that target the specific sectors and investment themes benefitting from long-term secular tailwinds.
The ETFs
The KraneShares MSCI China A 50 Connect UCITS ETF (KBA GY) offers investors a gateway into the heart of the Chinese equity market. Tracking the MSCI China A 50 Connect Index, the fund captures the top 50 large-cap stocks listed in Shanghai and Shenzhen that are accessible through Stock Connect. A unique feature of the ETF’s index is its status as the first to have officially recognized futures contracts for Stock Connect-eligible A-shares, providing a significant risk management tool and making the underlying stocks more appealing to global investors. The ETF comes with an expense ratio of 0.40%.
For those keen on integrating ESG parameters within their China allocation, the KraneShares MSCI China ESG Leaders UCITS ETF (KESG GY) may offer a compelling solution. Charging a similar expense ratio of 0.40%, the fund tracks the MSCI China ESG Leaders 10/40 Index which selects Chinese large and mid-cap companies with superior ESG profiles compared to their sector peers. KESG is aligned with Article 8 under the EU Sustainable Finance Disclosure Regulation (SFDR).
Spotlighting China’s dynamic internet arena, the KraneShares CSI China Internet UCITS ETF (KWBE GY) tracks the CSI Overseas China Internet Index which encompasses prominent internet and internet-related companies in China. The ETF’s expense ratio is 0.75%.
The KraneShares MSCI All China Health Care Index UCITS ETF (KRUE GY) follows the MSCI China All Shares Health Care 10/40 Index which covers Chinese firms active in the GICS-defined healthcare sector, spanning various market caps and listings across Mainland China, Hong Kong, and the US. KRUE has an expense ratio of 0.65%.
The KraneShares ICBCCS SSE Star Market 50 Index UCITS ETF (KSRE GY) offers exposure to the Science and Technology Innovation Board 50 Index with an expense ratio of 0.82%. The index encapsulates the top 50 firms by market capitalization and liquidity that trade on the SSE Science and Technology Innovation Board, the so-called STAR Market, Mainland China’s listing market for home-grown, high-growth science and technology companies.
Lastly, the KraneShares Electric Vehicles & Future Mobility ESG Screened UCITS ETF (KARS GY) tracks the Bloomberg Electric Vehicles ESG Screened Index which emphasizes companies worldwide that are pioneers in electric vehicles, their components, and related innovative areas. Any firm embroiled in ESG-related controversies is not eligible for inclusion. KARS has an expense ratio of 0.72%.