UBS launches MSCI China A-shares ETF

Feb 28th, 2020 | By | Category: Equities

UBS Asset Management has launched a new ETF providing exposure to China’s onshore equity market.

Andrew Walsh, Head of Passive & ETF Specialist Sales for UK & Ireland, UBS Asset Management

Andrew Walsh, Head of ETF & Passive Specialists – UK & Ireland, UBS Asset Management.

The UBS ETF (IE) MSCI China A SF UCITS ETF has listed on SIX Swiss Exchange in US dollars (CNAUA SW), on London Stock Exchange in pound sterling (CNUA LN), and on Xetra in euros (CNUA GY).

Andrew Walsh, Head of ETF & Passive Specialists – UK & Ireland, UBS Asset Management, commented, “China’s significant role in the global economy means allocations to the country are no longer a niche investing approach.

“Given its weight, we believe China should be treated as a standalone allocation of its own. Therefore, access to Chinese equities is of significant value to ETF investors seeking to augment and diversify their portfolios into a critical source of potential growth.”

The fund is linked to the MSCI China A Index which captures large and mid-cap representation across Chinese A-shares – companies that are domiciled in China and trade in renminbi on either the Shanghai or Shenzhen stock exchanges.

Only those securities that are accessible through the Stock Connect trading program are eligible for selection. Constituents are weighted by float-adjusted market capitalization while taking into account “Foreign Inclusion Factors” and “Foreign Ownership Limits”.

The design of the index makes it a suitable reference for international investors seeking exposure to Mainland-listed Chinese stocks. It also dynamically tracks the inclusion of Chinese A-shares within MSCI’s emerging markets and total China equity indices.

The third and final phase of MSCI’s most-recent inclusion schedule concluded in November 2019 when the inclusion factor of large and mid-cap Chinese A-shares was raised to 0.20. Following this move, these stocks represented approximately 4% of the total weight in the MSCI Emerging Markets Index.

There are currently 464 constituents in the MSCI China A Index with approximately one-quarter (25.9%) of the total weight dedicated to the financials sector, followed by consumer staples (13.6%), information technology (13.0%), industrials (12.8%), and health care (9.1%).

The ETF comes with an expense ratio of 0.30% which matches the cost of the $200m HSBC MSCI China A Inclusion UCITS ETF (HMCA LN). This fund tracks the MSCI China A Inclusion Index which is essentially identical to the MSCI China A Index now that MSCI has completed its current inclusion schedule.

BlackRock offers the iShares MSCI China A UCITS ETF (CNYA LN) which tracks the same index and houses $800m in AUM but it costs 0.40%.

DWS and Invesco also offer ETFs focused on the China A-share market. They come with expense ratios ranging from 0.50% to 0.65%.

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