Van Eck Global has launched Market Vectors China ETF (NYSE Arca: PEK), the first U.S.-listed exchange traded fund (ETF) designed to give investors exposure to China’s large and fast-growing A-Shares market, which represents all stocks traded on China’s two main exchanges in Shanghai and Shenzhen. PEK seeks to track the performance of the CSI 300 Index, an Index which captured approximately 64 percent of the total market cap of these two exchanges, as of September 30, 2010.
As China’s local A-Share market has historically been restricted to the country’s domestic investors and Qualified Foreign Institutional Investors, many Emerging Market and BRIC funds are not able to include the A-Share market in their country weighting schemes, leading to a fundamental underweighting of China’s true equity market in these funds. For this reason, Van Eck believes that gross domestic product (GDP) – which reflects the size of a country’s economy rather than the size of its available equity market – may be an important factor to consider when investing in international markets. Since 1996, China’s GDP has ranked first among all emerging markets and since June 2010, it has surpassed Japan as the second largest economy in the world (after the U.S.). This illustrates China’s growing dominance within the global economy, a position that many market capitalization weighted products do not capture.
“Because of its size and growth, we believe effective diversification requires investors to have broad exposure to China and this, in turn, requires exposure to A-Shares traded on the Shanghai and Shenzhen Exchanges. Without A-Shares, investors are missing significant exposure to a world economic powerhouse,” said Jan van Eck, Principal at Van Eck Global. “After all, China’s equity market in total currently accounts for 33 percent of the emerging market universe. With PEK, we are pleased to offer investors a way to access the A-Share marketplace—a marketplace that accounts for nearly a quarter of all emerging markets equities and 72 percent of China’s equities.”