LSE launches first China A shares ETF in London
The London Stock Exchange has launched the first Chinese renminbi ETF listed in London, in a deal that will help open the Chinese A shares market up to international investors.
Created by Hong Kong-based CSOP Asset Management, and London-based Source, the new ETF is the first to qualify under China’s qualified foreign institutional investor scheme, which effectively restricts access to the Chinese market to firms with a licence. There are government-imposed quotas for the number of licences that are issued, with very few granted in some years.
The ETF is available to retail and institutional investors across Europe, and uses CSOP’s Hong Kong RQFII licence to allow investors to invest directly in the top 50 companies in mainland China (the A50).
Previously, access was highly restricted. Indirect alternatives, such as the FTSE China A50 futures listed on the Singapore Exchange, gained in popularity. The new product listing on the LSE follows a visit by UK chancellor George Osborne to Hong Kong and China earlier this year to build new ties between the UK and Chinese financial services industry.
Already, London is a centre of global renminbi trading, accounting for 62% of all transactions outside China according to the LSE. In October, the UK was awarded the first RQFII quota outside of greater China, worth £8.02 billion, while the Prudential Regulation Authority agreed to consider applications from Chinese banks to establish wholesale branches in the UK.
“The launch of this RQFII ETF on the London Stock Exchange underlines the UK’s position as the western centre for offshore renminbi, and the UK’s position as a global centre for asset management,” said Sajid Javid, financial secretary to the UK Treasury.
In December, Standard Chartered and Agricultural Bank of China launched Renminbi-denominated clearing services in the UK. The currency has been growing since it was first introduced to foreign investors in 2007.