BlackRock A-share ETF joins crowded London market

The global asset manager yesterday launched a China A-share exchange-traded fund in London, adding to a competitive marketplace. A rival A-share ETF provider has already slashed its fees.
BlackRock A-share ETF joins crowded London market

BlackRock piled cost pressures onto rival asset managers yesterday with the launch of a China A-share ETF in London’s increasingly crowded market.

On the day of launch a rival operator slashed its fees on its own A-share exchange traded fund in London.

BlackRock’s iShares MSCI China A Ucits ETF, which has been listed on the London Stock Exchange, aims to track the MSCI China A international index with a basket of 350 Shanghai and Shenzhen stocks.

But the ETF will be joining an increasingly crowded space, with a handful of fund managers having already launched various China-focused ETFs, the most recent of which include China Construction Bank’s RQFII money-market fund.

Regardless, the pie for China and Greater China funds is growing larger, with their AUM standing at £1.91 billion ($2.8 billion) in the UK in February this year, representing a 15% rise from the £1.66 billion AUM in February 2014.

Indeed, the introduction of the listed fund with an expense ratio of 0.65% appears to have already put pressure on the A-share ETF market. Deutsche Asset & Wealth Management yesterday slashed fees on its CSI300 ETF down to 0.65% from 1.1%.

Deutsche claimed the move was due to the provision of more channels allowing access to China’s A-share market, such as through the Shanghai-Hong Kong Stock Connect scheme and a greater potential RQFII quota through its German licence.

BlackRock said that the fund which is tracking the MSCI China A International is the first of its kind. As opposed to the CSI300’s 41% exposure to financial sectors, 37% of the MSCI index’s stocks are made up of financial components.

BlackRock also boasted the listed fund was being solely managed by itself as opposed to working as a joint venture, as is the case with CSOP’s partnership with Source, which launched a FTSE A50 Ucits ETF in January 2014, Harvest Global Investment with Deutsche AWM, or China AMC and Van Eck Global.

BlackRock’s fund is utilising its Rmb2.1 billion ($337 million) RQFII quota for the ETF. It is the first fund within BlackRock’s UK subsidiary to use the quota.

The fund, which BlackRock says will be targeted at international investors, will also be listed on Germany’s Deutsche Bourse as soon as next week and soon after in Switzerland, according to sources. However, the company’s spokesman declined to comment.

“Investor interest in China is high and shows no sign of abating,” said Tom Fekete, head of product for iShares in Europe, Middle East and Africa. “The world’s second largest economy is increasingly opening its stock market to greater foreign investment, and this ETF provides investors with a new option for accessing Chinese shares.”

¬ Haymarket Media Limited. All rights reserved.