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Right After MSCI Snub, A New A-Shares ETF Debuts

June 16, 2016 8:27 am
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Right After MSCI Snub, A New A-Shares ETF Debuts

A day after index provider Msci Inc (NYSE: MSCI) opted against including stocks trading on mainland China, also known as A-shares, in its major emerging markets benchmarks, BlackRock, Inc. (NYSE: BLK)’s iShares unit launched a new exchange-traded fund tracking A-shares.

Picking Up The Slack

The iShares MSCI China A ETF (ISHARES IV PLC ISHARES MSCI CHINA A UCITS ETF (BATS: CNYA)) debuted Wednesday. Home to over 400 stocks, CNYA “seeks to track the investment results of an index composed of domestic Chinese equities that trade on the Shanghai or Shenzhen Stock Exchange,” according to iShares, the world's largest ETF issuer.

Related Link: China’s Stocks Are Not Ready For “Prime Time,” CNBC’s Bob Pisani Says

MSCI's decision on A-shares, revealed Tuesday after the close of U.S. markets, saw the index provider again opting against elevating the stocks trading on mainland China to widely followed indexes such as the MSCI Emerging Markets Index.

"International institutional investors clearly indicated that they would like to see further improvements in the accessibility of the China A shares market before its inclusion in the MSCI Emerging Markets Index. In keeping with its standard practice, MSCI will monitor the implementation of the recently announced policy changes and will seek feedback from market participants," said MSCI Managing Director Remy Briand in a statement.

Diving Into CYNA

As is the case with many other China ETFs, including A-shares funds, CNYA is heavily allocated to financial services stocks. That sector accounts for over 35 percent of the new ETF's weight. At 17.1 percent and 11 percent, industrial and consumer discretionary names are the other sectors to garner double-digit allocations in CNYA.

“Foreign investment in A-shares is permitted principally through regulations in the People’s Republic of China known as the Qualified Foreign Institutional Investor and Renminbi Qualified Foreign Institutional Investor systems,” according to ETF Trends.

CNYA is the 42nd iShares ETF to list on Bats Global Markets, making the issuer by far the largest on the fast-growing ETF marketplace.

“Bats ranks as the top exchange operator for ETF trading with the Bats Exchanges executing 24.5 percent of all ETF trading in May 2016. Bats has been the #1 U.S. market for ETF trading and the #2 U.S. market for overall equities trading for every month of 2016,” according to a statement.

CNYA charges 0.65 percent on an annual basis, or $65 per $10,000 invested.

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