Quote:Yes, it is a synthetic. I picked it over a fund because lower fees. < 1% per annum and normal brokerage fees for transaction. Fund sales and mgmt fees tend to be higher. Counterparty risk is there but it is HSBC.
Here are some notes that I have on the Chinese companies ETFs that I know of.
iShares FTSE A50 China Index ETF (HKSE: 2823)
- Synthetic.
- Exposure to top 50 A-shares by full market cap.
- More than 60% in financials.
- Management estimates of total expense ratio: 1.39%
- FTSE A50 index tracks SSE Composite relatively well.
SPDR S&P China BMI Fund (NYSE: GXC)
- Owns actual underlying shares.
- Exposure to top 600 China-domiciled companies, regardless of listing location, that are available to investors. Owns A-Shares, H-Shares, ADRs etc.
- Less than 40% in financials.
- Management estimates of total expense ratio: 0.59%
- Has outperformed SSE Composite in the last 4 years. Probably due to SSE Composite being one of the the world's worst performing stock indices, even worse than the Nikkei 225.
ChinaAMC CSI 300 Index ETF (HKSE: 83188)
- Owns actual underlying shares.
- Exposure to the top 300 companies in terms of market cap and liquidity on the Shanghai and Shenzhen Stock Exchanges (A-Shares)
- Less than 40% in financials.
- Management estimates of total expense ratio: 0.99%
- CSI 300 index tracks SSE Composite relatively well.
- Subject to RQFII quota of RMB 5B.
Besides owning the actual underlying shares, the other two index ETFs also have the advantage of lower cost than the iShares FTSE A50 China Index ETF. Depending on how you view the financial companies in China, the lower weighting on financials of the other two ETFs may also be considered an advantage.
One big drawback of the ChinaAMC CSI 300 is that it is a relatively new concept - the first RQFII fund. As such, there is some regulatory risk. For example, will their quota of RMB 5B be increased once the limit is reached? If not, then the ETF may start trading at a premium/discount to NAV.
Anyway, my understanding is that if you want a piece of the Chinese companies pie, there are better and cheaper ways to do it than the iShares FTSE A50 China Index ETF.
YMMV.