Market Vectors, a US-based provider of exchange-traded funds, has announced the launch of the Market Vectors ChinaAMC SME-ChiNext ETF (CNXT), an innovative new fund providing direct exposure to SME and high growth stocks listed in China.
Market Vector’s latest ETF provides exposure to SME and high growth stocks listed on the Shenzhen Stock Exchange. (Photo © Xublake)
Through a partnership with ChinaAMC, one of China’s largest asset managers, the fund will invest directly in physical China A-Shares.
It is linked to the SME-ChiNext 100 Index, an index intended to track the performance of the 100 largest and most liquid stocks listed and trading on the Small and Medium Enterprise (SME) Board and the ChiNext Board of the Shenzhen Stock Exchange (SZSE).
The SME Board was established in 2004 as an exchange platform for mainly mature or maturing small- and medium-sized companies in China. The ChiNext Board, a wholly-owned but independent arm of SZSE, began trading operations in 2009 and has focused primarily on start-ups and growth companies.
As of June 30, 2014, a total of 720 companies were listed on the SME Board with a combined market value of $648.58 billion, while 381 companies traded on the ChiNext Board with a combined market value of $298.42 billion.
ChinaAMC will serve as sub-advisor to the fund using a Renminbi Qualified Foreign Institutional Investor (RQFII) quota that it has received to invest in China A-shares. This marks the second ETF for which Market Vectors and ChinaAMC have partnered in this way, joining the Market Vectors ChinaAMC A-Share ETF (PEK).
“We’re very excited to bring a unique vehicle like CNXT to market as part of our growing relationship with ChinaAMC,” said Amrita Bagaria, ETF Product Manager with Market Vectors. “The Chinese government appears to recognize that small, non-government backed firms often struggle to access capital because large banks generally do not offer them financing. As such, the SME and ChiNext Boards were established to help promote private innovation in the public markets, and this new fund gives investors a liquid, transparent way to gain access to some of these growing companies.”
At the start of 2014, SMEs in China were contributing 60% of the country’s GDP, 80% of its employment, and 74% of its technological innovation, according data from the World Trade Organization.
“The information technology, consumer discretionary and staples, and health care sectors are driving what has been called China’s ‘New Economy’,” added Bagaria. “They are among the top sectors represented in the underlying index for CNXT.”
The fund has been listed on the NYSE Arca and has a net expense ratio of 0.68 percent.