Tag Archives: PEK

The Real Driver Behind China ETF Action: Column A and Column B

April 28, 2015 MarketsMuse Staff Reporter Leave a comment

MarketsMuse.com ETF update profiles the real driver behind the surge in China-focused exchange-traded funds courtesy of below extract from 28 April a.m. column by Todd Shriber of ETFtrends.com “Surprising Drivers of the A-Shares ETF Surge.”

It is not a secret that exchange traded funds holding Chinese equities, both A-shares trading on the mainland and Hong Kong-listed H-shares, have recently been delivering staggering returns.

Over the past month, the top 13 non-leveraged ETFs are all China funds, according to ETFScreen.com. That group includes 4 A-shares ETFs, an impressive number considering there are just seven such funds trading in the U.S. Year-to-date, seven of the top 11 non-leveraged ETFs are China funds, four of which hold A-shares.

Beijing-controlled companies have been driving the Shanghai Composite higher, creating a divergence between that benchmark index and the Shenzhen Stock Exchange Composite Index. (See Dec 2014 ETFtrends.com for background)

“The explanation for this divergence revolves around State Owned Enterprises,” said Rareview Macro founder Neil Azous in a note out Monday. “The Shanghai Index is composed of ~68% SOE and ~32% non-SOE whereas the Shenzen Index is only 22% SOE and 78% non-SOE.”

Granted, it is just a small data set, but over the past week the SOE-heavy ASHR and PEK have performed in-line with the Deutsche X-trackers Harvest CSI 500 China A-Shares Small Cap Fund (NYSEArca: ASHS) as each have raced to all-time highs.

Azous notes that speculation about China’s plans to possibly reduced the number of SOEs via mergers has contributed to the rally. For example, there is speculation that PetroChina (NYSE: PTR) and China Petroleum & Chemical could be merged to create that country’s equivalent of Exxon Mobil (NYSE: XOM). Those stocks combine for almost 1% of ASHR’s weight.

For the entire article by ETFtrends.com Todd Shriber, please click here

ETF News

China ETFs: A Chinese Menu of Share Class Descriptions

November 15, 2012 MarketsMuse Staff Reporter Leave a comment

Courtesy of Dennis Hudacheck

Investing in China is tricky. There are now more than 20 China-focused ETFs to choose from, ranging from size and style funds to sector-specific funds. As if sifting through expense ratios, liquidity and holdings isn’t enough, China investors have another big, fundamental factor to consider: Chinese share classes.

Foreign investment in China is still restricted: A U.S. investor cannot simply open a brokerage account and trade locally listed Chinese shares. As a result, there are multiple shares classes of Chinese companies floating around on various exchanges, allowing investors different ways to access this complex market.

Depending on the underlying index that an ETF tracks, some funds are eligible to hold only a certain type of shares. This matters because the different share classes an ETF is eligible, or ineligible, to hold can significantly impact the fund’s performance, and ultimately determine the type of Chinese companies in the portfolio.

Chinese share classes, especially as they relate to ETFs, are often misunderstood—or worse, ignored altogether. We at IndexUniverse think investors deserve better, so we prepared this document to provide insight and guidance on the topic to help investors make an informed decision on choosing the right China ETF. Continue reading →

ETF News, People Profiles

Better Take a Peak at China’s PEK..Premium Merchandise

April 20, 2012 MarketsMuse Staff Reporter Leave a comment

Courtesy of the ETF Professor at Benzinga.com

Following the March 22 debacle concerning the VelocityShares Daily 2x VIX Short-Term ETN (NYSE: TVIX that saw the now infamous ETN tumble 30% in that one trading day, traders and investors predictably wondered what exchange-traded product could be next to fall victim to a similar scenario.

That scenario being an ETF or ETN trading at an elevated premium to its net asset or indicative value. One fund that has been noticed trading at elevated premium’s to its NAV is the Market Vectors China ETF (NYSE: PEK [6]) and this has been the case since the ETF debuted in October 2010.

What some investors may not understand is the reason why the Market Vectors China ETF has previously traded at premiums to its NAV that have been as high as 12%, sometimes a tad more. PEK is the only U.S.-listed ETF that offers investors exposure to China’s A shares market, but since foreign investors are limited in owning Chinese A shares directly, PEK uses swaps and derivatives instruments to accomplish its objectives.

Noteworthy is the fact that PEK’s premium has started to shrink, coinciding with news announced earlier this month that the China Securities Regulatory Commission boosted the quotas for qualified foreign institutional investors to $80 billion from $30 billion.

Chris Hempstead, head of ETF trading for New York-based execution firm WallachBeth Capital, talked about the implications increased access to China’s A shares for foreign investors may have on PEK in an exclusive interview with Benzinga on Friday.

hempstead 1 — Chris Hempstead, WallachBeth Capital

“PEK trading an elevated premium to its NAV in the past was not a function of it not being able to create and redeem shares as was the case with TVIX,” Hempstead said. “There are completely separate reasons why PEK’s NAV has been elevated compared to TVIX and some of the other products.”

Hempstead explained that it is the process by which PEK accesses China’s A shares market that has led to the high premium to its NAV in the past. Continue reading →