China-focused ETF issuer Krane Funds Advisors has unveiled its second ETF in Europe with the launch of the KraneShares MSCI China A Share UCITS ETF (KBA LN) on the London Stock Exchange.
KraneShares made its debut in Europe in November 2018.
The fund tracks the MSCI China A Index, mirroring the strategy of a $700m ETF offered by KraneShares in the US.
The MSCI China A captures the performance of large- and mid-cap China A-share equities.
A-shares are Mainland-listed, renminbi-denominated stocks that trade on either the Shanghai and Shenzhen stock exchanges.
The index is designed for international investors and covers only those securities that are eligible for trading via the Stock Connect schemes.
Its composition also reflects the full list of China A-share securities that index provider MSCI plans to include within the flagship MSCI Emerging Markets Index by the end of November 2019, following the conclusion of its latest China A-share eligibility review.
The index currently consists of 427 constituents. Financials make up the largest sector exposure at 29.2%, followed by consumer staples (14.6%), industrials (12.6%), information technology (9.4%), and materials (7.7%). The biggest individual holdings are Kweichow Moutai (5.0%), Ping An Insurance (3.9%), and China Merchants Bank.
According to data from Morningstar, MSCI’s inclusion of A-shares is projected to trigger over $300 billion of inflows into securities indexed by the MSCI, providing a bullish case for investment in the fund.
Jonathan Krane, CEO of KraneShares, commented, “We are seeing strong demand for China A-share exposure from European investors as the MSCI China A-share inclusion progresses. With $1.8 trillion tracking the MSCI Emerging Markets Index alone, potential inflows will be significant. Our KBA UCITS fund provides European investors with strategic access to the Mainland China investment opportunity.”
The fund comes with total annual fund operating expenses of 0.40% and has been seeded with $20m.
KraneShares made its debut in Europe in November 2018 with the launch of the KraneShares CSI China Internet UCITS ETF (KWEB LN). The fund tracks the CSI Overseas China Internet Index, providing exposure to US and Hong Kong-listed Chinese internet and internet-related companies – companies KraneShares characterizes as local equivalents of the likes of Google, Facebook, Twitter, eBay, and Amazon.
KWEB comes with annual expenses of 0.75%.