UOB Asset Management is launching an A-shares ETF on SGX Mainboard. Buying and owning A-shares is limited to Chinese Nationals and selected foreign institutions. With this ETF, it realises the wish of many people to own China’s A-shares. The current China ETFs listed in SGX are db x-trackers FTSE/Xinhua China 25 and Lyxor ETF China Enterprise. The former consists of H-shares and red-chips while the later only contain H-shares. Hence, this new ETF is currently the only chance of retail investor to access China A-shares in Singapore.
If you are still confuse among A-shares, B-shares, etc, you can read the definitions which are taken from FTSE’s website:
A-Shares
Securities of Chinese incorporated companies that trade on the Shanghai or Shenzhen stock exchanges, quoted in Chinese Renminbi (RMB). Traded by residents of the People’s Republic of China (PRC) or international investors under the China Qualified Foreign Institutional Investors (QFII) regulations.
B-Shares
Securities of Chinese incorporated companies that trade on the Shanghai Stock Exchange (quoted in US Dollars) or the Shenzhen Stock Exchange (quoted in Hong Kong Dollars – HKD). Traded by both non-residents of the PRC and residents with appropriate foreign currency dealing accounts.
H-Shares
Securities of companies incorporated in the People’s Republic of China and listed on the Hong Kong stock exchange. They can only be traded by Chinese investors under the Qualified Domestic Institutional Investors scheme (QDII). There are no restrictions for international investors.
Red Chip Shares
Red chip companies are incorporated outside of the People’s Republic of China that trade on the Stock Exchange of Hong Kong. A Red Chip is a company that is substantially owned directly or indirectly by Mainland China entities, and has the majority of their sales revenue or operating assets derived from Mainland China.
But why A-shares?
In my point of view, buying A-shares is the most direct method to participate in China’s growth. It is like owning an “original” China. It is buying a Toyota made in Japan and not Thailand. It is really as close as you can get. Secondly, there are limited companies that exist as B-shares and H-shares which means you may miss many opportunities in China’s growth. Thirdly, we all understand volume plays a big part in influencing stock price. China has the biggest population in the world and if they are buying A-shares, the demand will be substantial.
How to buy?
Channelnewsasia reported “the initial offer period of the ETF will be from October 29 to November 4. During this period, the minimum subscription is 1,000 units, but upon listing on November 12, the ETF will be quoted and traded in board lots of 100 units.” The intial price should be between S$2.40 to S$2.50. It will be denominated in S$. I believe you would be able to place order through ATMs.
No prospectus is available yet, but one can take reference to ishares FTSE/Xinhua A50 China Index ETF listed in HK. The Index is actually heavy on Financials at almost 60%. See the sector breakdown:
From ishares HK prospectus
Let’s take a look at the performance (pretty impressive):
From ishares HK
Before we get excited and invest, the cost of investment is an important consideration. Although I do not expect the sales charge and management fee to be high (since it is an ETF), it is still better to confirm the figure with the issuer before committing.
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there is prospectus available at their UOBAM website: http://www.uobam.com.sg/uobam/assets/pdfs/prospectus/china_etf.pdf
True, the expense ratio is not quoted in the prospectus. The fees and charges are quoted in 8.2 inside the prop – look complicated to me. One con for those looking for dividends: According to prop, they do not plan to give out dividends.
kc, thanks for the link.
Indeed their fees are not clearly spelt out. Although they put the following fund fees payable by the subfund, I believe the costs will be transferred to the investors.
1) Manager fee (0.45%)
2) Trustee fee (0.10%)
3) Maintenance fee (0.3%)
These are on top of the of the normal brokerage charges, SGX clearing and trading fees. The cost is rather high for am ETF but this is due to the fund being a subfund.