GF International Investment Management Limited (GFI), launched its MSCI China A International ETF in Hong Kong today.  The ETF is the first foray into the Hong Kong ETF market for the subsidiary of Guangzhou-based GF Fund Management.  The ETF is scheduled to start trading on July 29, 2015.

“The ETF is one part of our strategy to develop products that provide overseas investors with innovative ways to achieve their investment goals,” said Nathan Lin, CEO of GFI, at a press conference in Hong Kong today.

MSCI launched its China A International Index in June 2014, as a step in the index provider’s gradual process of incorporating Chinese equities into its family of emerging market indices.   While the full inclusion of China A shares in the indices is still some time away, the MSCI China A International Index is designed to facilitate inclusion of the shares in foreign investors’ portfolios.  

The inclusion of China A shares into emerging market and global equity indices has been a hotly-debated and speculated topic during the last year.   Index providers have so far refrained from the complete inclusion, due to China’s capital flow controls and restrictions on cross-border investments.  Rene Veerman, managing director and head of Hong Kong and Taiwan for MSCI was pointedly mum on this topic today.

MSCI China A International Index had 370 constituents as of July 22, but the number is not fixed.  It includes A shares listed in Shanghai and Shenzhen.  The index weighting of individual stocks reflects the 30% foreign ownership limit in Chinese companies.

GFI MSCI China A International ETF will trade on Hong Kong Stock Exchange in Hong Kong dollars and in renminbi.  GFI estimates the management fees to be 0.8% of the fund’s NAV per year.   GFI has secured QFII and RQFII quota for the ETF’s physical implementation.  The fund provider will also use Shanghai-Hong Kong Stock Connect to manage the fund, if needed.

GF Fund Management was established in 2003. One of China's top 10 asset management firms by assets. It operates 75 mutual funds in China. Its overall AUM is 316 billion renminbi (US$51 billion).