A news release said the new offering is 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, which captured approximately 64% of the total market cap of these two exchanges as of September 30, 2010, according to the announcement.
“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, in the news release.
Currently, most other U.S. funds offering China exposure invest in shares listed on exchanges in Hong Kong (H-Shares) or elsewhere, the news release said.
PEK seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the CSI 300 Index. As of September 30, 2010, the Index comprised 38% small- and mid-cap stocks and 62% large-cap stocks. The index is diversified by sector and covered all 10 Global Industry Classification (GIC) sectors with top weightings in Financials (34%), Industrials (17%), and Materials (15%) as of September 30, 2010.
The Fund will not invest directly in A-Shares immediately; instead, it expects to invest in swaps and other types of derivative instruments that have economic characteristics that are substantially identical to the economic characteristics of China A-Share stocks, the company said. The Fund carries a net expense ratio of 0.72 % and a gross expense ratio of 0.85%.