Krane Funds Advisors has changed the underlying index on the $720 million KraneShares Bosera MSCI China A Share ETF (KBA US), one of the largest US-listed ETFs to cover the market of Mainland-listed Chinese stocks.
Following the change, the fund now tracks the MSCI China A Index.
The move, which sees the fund adopt the MSCI China A Index, broadens the investment mandate of the fund in line with MSCI’s decision to increase exposure to Chinese A shares in its China and emerging market benchmarks.
MSCI currently includes 264 China A shares at a 10% inclusion factor within these indices.
By the end of November 2019, MSCI’s definition of China will increase to 436 China A shares, covering 264 large-cap and 172 mid-cap stocks including 30 securities from ChiNext, a Nasdaq-style board of the Shenzhen Stock Exchange. The inclusion factor of these stocks will also be raised to 20%.
The KraneShares fund previously tracked the MSCI China A Inclusion Index which is designed to track the progressive partial inclusion of A shares in the MSCI Emerging Markets Index over time. The index reflects the 264 constituents that are currently part of the China and emerging market indices.
By contrast, the MSCI China A Index already covers all 436 constituents.
Brendan Ahern, CIO of KraneShares, commented, “When looking at the inclusion process, we realized that the MSCI China A Inclusion Index will converge with the MSCI China A Index following the upcoming November introduction of mid-cap securities. By moving to track the MSCI China A Index, KBA has accelerated the three-step process into a single step, gaining full potential diversification benefits immediately.”
“The MSCI China A Index provides strategic exposure to the investment opportunity in Mainland China,” added Jonathan Krane, CEO of KraneShares. “With $1.8 trillion tracking the MSCI EM Index alone, the MSCI inclusion could trigger significant institutional flows from both passive and active managers into the A share securities that the KraneShares Bosera MSCI China A-Share ETF holds today.”