Lyxor launches physical RQFII China A-Shares ETF

Sep 4th, 2014 | By | Category: Equities

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Lyxor Asset Management has become the latest European exchange-traded fund issuer to launch an ETF providing physical exposure to domestic Mainland China stocks, known as “A-Shares”.

Lyxor launches physical RQFII China A-Shares ETF

The newly launched Lyxor UCITS ETF MSCI China A (CNNA) provides exposure to Renminbi-denominated securities listed on the Shanghai and Shenzhen stock exchanges.

The Lyxor UCITS ETF MSCI China A (CNNA) is the first physical A-Shares ETF to be listed on Euronext Paris, and will also list on the London Stock Exchange on 9 September 2014. It has a total expense ratio of 0.85%.

The ETF tracks the performance of the MSCI China A Index, an index capturing the large and mid-cap representation of Renminbi-denominated securities listed on the Shanghai and Shenzhen stock exchanges.

The index is well diversified, comprising approximately 460 companies, but does have a significant exposure to financials, with Ping An Insurance, China Merchants Bank, China Minsheng Bank, Industrial Bank and Shanghai Pudong Development Bank forming the top five holdings.

The fund is managed by the Hong Kong subsidiary of Fortune SG, Lyxor’s Chinese joint-venture, which was awarded Renminbi Qualified Foreign Institutional Investor (RQFII) quota by Chinese authorities with a view to launch the ETF in Europe.

The fund builds on Lyxor’s experience in the Chinese market, with the issuer already managing the largest European ETF with exposure to Chinese companies (via stocks listed in Hong Kong), with over $1 billion of assets under management.

Commenting on the launch, Arnaud Llinas, Lyxor’s Global Head of ETFs and Indexing, said: “A-Shares represent approximately 75% of China’s total equity market capitalisation. However, until now these stocks have been under-represented in portfolios. In spite of remaining investment constraints linked to the quota system, the pace of regulatory reforms and other initiatives like the Shanghai/Hong Kong Stock Connect program increase the perspective of inclusion and many international investors are already seeking A-Shares investment opportunities. Our new ETF responds to these needs in a flexible and diversified vehicle”.

Stéphane Roger, CEO of Fortune SG’s HK subsidiary, added: “Since its creation in 2003, Fortune SG has become a leading fund management company in China and has built a strong franchise in equity funds. Fortune SG is thus delighted to open a door to China A-Shares markets in partnership with Lyxor, its shareholder and one of the most prominent ETF providers in Europe”.

Fortune SG is a joint-venture between Fortune Trust (Baosteel Group) and Lyxor. Fortune SG is headquartered in Shanghai, with branches in Beijing, Shenzhen and a subsidiary in Hong Kong with RQFII capabilities.

Lyxor is Europe’s third largest issuer of exchange-traded funds, with more just shy of $50 billion of ETF assets under management.

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