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
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
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
- KraneShares China Consumer Luxury ETF will replicate the Dow
Jones China Consumer Luxury Index. It will invest in companies
that provide high-end consumer goods and services, from apparel
to hotels. The index includes companies that generate "a sizable
portion of their sales" in China.
- KraneShares China Alternative Energy ETF will track the Dow
Jones Alternative Energy Index and include companies related to
alternative energy sources such as solar power and wind, as well
as the manufacture and production of electric cars, their
components and clean technologies.
- KraneShares China Internet ETF will replicate the CSI
Overseas China Internet Index. The fund will invest in
China-based Internet companies involved with software and
services, Internet retail and entertainment software.
- KraneShares China Consumer Staples ETF will track the CSI
Overseas China Consumer Staples Index, which comprises
China-based companies in food and staples retail, beverage and
tobacco products, or other various household and personal
- KraneShares China Consumer Discretionary ETF will track
consumer discretionary stocks with a focus on cars and parts,
consumer durables and apparel, consumer services, media and
- KraneShares China Urbanization ETF
will track the CSI Overseas China Urbanization Index and invest
in companies involved with raw materials, property and real
estate, industrial names, information technology/hardware and
- KraneShares China Five Year Plan ETF, which will also track a
CSI benchmark focused on China-based companies that are deemed
important in the Chinese government's Five Year Plan.
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
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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