Overseas investors get 1st retail index fund on China stock markets

Asian Economic News, Nov 15, 2004

HONG KONG, Nov. 10 Kyodo

An index fund based on China's securities market will be launched on Nov. 18 to allow individual overseas consumers to invest in mainland bourses for the first time, Barclays Global Investors said Wednesday.

The iShares FTSE/Xinhua A50 China Tracker, which captures 50 best-performing companies in the Shanghai and Shenzhen stock exchanges, including Baoshan Iron & Steel Co., China United Telecommunications Corp. and China Petroleum & Chemical Corp., will be traded in the Hong Kong Stock Exchange.

''The A50 China Tracker is an innovative product that offers investors an easy and affordable way to gain exposure to the A-shares markets which include many growing private Chinese enterprises,'' said Joseph Ho, BGI's regional director for North Asia.

Currently, A-shares traded in yuan in the two stock exchanges in China are restricted to mainland Chinese citizens. Only foreign investment banks authorized under the Qualified Foreign Institutional Investors scheme can invest directly in the mainland stock markets.

Citigroup, the participant dealer of the fund, will launch US$20 million at the initial public offering and US$50 million in the next 12 months, with a total of US$400 million reserved for the fund.

The minimum investment will be one board lot of 100 units, which is expected to cost around HK$4,000 to HK$5,000 (US$514 to US$642) at its IPO.

Ho said, ''The growth of the A-Shares markets is faster than any other classes of Chinese securities with many large IPOs, especially the large state banks, expected within the next 12 months.''

Pressure for the yuan to appreciate will also push the fund up, he added.

FTSE/Xinhua is a real-time index launched in July 2003. FTSE is a joint venture of Financial Times and the London Stock Market, whereas, Xinhua Finance, is a financial service provider based in Hong Kong.

BGI said the index was chosen because it has the longest history in the newly-emerged area.