KraneShares Drafts China Dividend ETF
April 25, 2012
KraneShares Trust, a newcomer to the ETF space that’s also partnering with Exchange Traded Concepts on a number of China sector-focused ETFs, filed paperwork with U.S. regulators to market yet another Chinese equities ETF that would focus on dividend-paying stocks.
The KraneShares Dow Jones China Select Dividend ETF will track a Dow Jones index comprising dividend-yielding stocks from China-based companies listed primarily in Hong Kong and in the U.S., the filing said.
The dividend-yield-weighted index picks stocks showing the most prospective dividend and yield characteristics from the Dow Jones China Offshore Total Stock Market Index and the Dow Jones Hong Kong Total Stock Market Index, both of which are broad market-capitalization-weighted benchmarks.
The new fund will join an extensive roster of ETFs that serve up access to what is now the second-largest economy in the world. Even though growth in China has slowed recently, the country remains a major player in the emerging market segment and, increasingly, in the global economy.
The new fund’s registration statement is totally separate from the registration statement Exchange Traded Concepts filed on behalf of KraneShares last summer. The new filing depends on KraneShares obtaining exemptive relief from U.S. regulators that will give the firm the legal right to market specific ETFs.
That first registration statement included seven funds. Those are:
The Case For China
Investors have largely embraced China-focused funds, particularly since the U.S.-centered credit crisis of 2008 sent the developed economies into deep credit-related recessions from which many have yet to fully recover. Conversely, emerging market countries bounced back from the shock relatively quickly.
Funds like iShares’ FTSE China 25 Index Fund (NYSEArca: FXI) and SPDR’s S&P China (NYSEArca: GXC) have benefited from that demand. FXI boasts more than $6.1 billion in assets, while GXC has nearly $900 million, even if their recent performance has been nothing to write home about.
FXI, which is focused on Hong Kong-listed stocks, has slid more than 15 percent in the past year, according to information on iShares’ website, and GXC has dropped nearly 18 percent in the same period.
The New Fund’s Aim
KraneShares’ fund will invest in China companies as represented by H-Shares—stocks from companies that are incorporated in China and listed on the Hong Kong Exchange.
The proposed ETF will also own so-called red chips, which are companies whose main business takes place in China, but that are incorporated in foreign jurisdictions controlled directly or indirectly by the Chinese government. Red chips are also listed on the Hong Kong Exchange, the filing said.
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