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We've been following the CSI 300 for quite some time in advance of this ETF being issued and are glad to see it available. It best features the investment climate within China itself beyond most China-related ETFs popular and widely followed.
A more critical issue is the 13.87% premium PEK is currently trading at over the index. This large premium has been at around this level (low of near 9% to a high of near 20%) since issuance. For ETF investors, this may be off-putting since wide swings lead to tracking inefficiencies.
The Missing LinkThe primary reason for the premium is Van Eck does not have a QFII (Qualified Foreign Institutional Investor) license permitting it to deal in buying A-shares. Until it receives this license, it must go through an intermediary with that license (in this case Credit Suisse Securities (Europe) to gain exposure to the index.
It's an intriguing and important issue. Van Eck was smart to cover this index before competitors. It may be most investors will be content to wait for QFII license to be issued. In the meantime, investors should have their eyes on this issue. Over the long term, an issue like PEK may be the most direct way to invest in growing Chinese markets.
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