NEW YORK (TheStreet) -- Specialty China ETF provider KraneShares launched its third and broadest fund this week with KraneShares Bosera MSCI China A ETF (KBA). As the name implies, KBA accesses the previously closed although still somewhat restricted A-share market in China.
The term A-share refers to stocks listed in Shanghai and Shenzen which can only be accessed in conjunction with local companies that have been designated renminbi qualified foreign institutional investors. KraneShares is working with Chinese firm Bosera Funds to offer KBA.
KBA is the third U.S. fund to offer broad based China A share access after the db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) and the Market Vectors ChinaAMC A-shares ETF (PEK). Both ASHR and PEK track the Harvest Index, which has 300 constituents, while KBA tracks an index from MSCI that has 462 components.
Many broad-based China ETFs, regardless of whether they track A-shares or not, are very heavily weighted to financial stocks. The largest China ETF trading on the U.S. market by far is the iShares China Large Cap ETF (FXI) with $5 billion in assets; it allocates 53% to financials. A disproportionately large weighting to one sector obviously makes the fund vulnerable to some sort of crisis within that sector.
KBA allocates 32% to the financial sector, which is still a lot but is less than other broad based funds. AHSR and PEK each have 36% to 39% in financials.
Industrials are the second largest sector in KBA at 16%, followed by consumer discretionary at 12% and materials at 9%. The fund is very light on technology stocks at just 5%, in line with the other broad based funds.