Chinese asset management firm GF Fund Management launched a new exchange traded fund (ETF) on the London Stock Exchange on Thursday, on a wave of new of shore products that help foreign investors access China's growth.
The ETF launch comes as sluggish growth in international markets has prompted investors to eye China for opportunities, although regulatory restrictions makes that difficult for retail investors.
GF Fund Management's United Kingdom subsidiary, GF International, has used its Renminbi Qualified Foreign Institutional Investor license to invest in Chinese stocks that underlie the ETF.
Known as the GF International-FTSE China A UCITS ETF, the product tracks a portfolio of stocks, including 779 firms listed on stock markets in Shanghai and Shenzhen.
The FTSE Global China A Index is developed by FTSE Russell, the London Stock Exchange Group's index provider and differs from most emerging market indexes by including Chinese stock market shares.
In this context, the GF International ETF is likely to be in demand after A-shares are included in FTSE Russell's mainstream indexes.
"China is the world's second-largest capital market and offers international investors rich opportunities," said Miller Guo, CEO of GF International.
GF International is the eighth Chinese firm to issue an ETF on the London Stock Exchange, although GF International is the first to be responsible completely for the ETF's investment management and distribution. Other Chinese ETFs are distributed via third-party or joint-venture products.
Mark Makepeace, CEO of FTSE Russell, expects to see investors and issuers progressively use FTSE Russell transition indexes, such as the FTSE Global China A Index.
PietroPoletto, head of ETF at the London Stock Exchange Group, said the exchange has recently experienced significant growth in ETF trading.
"We continue to see investor appetite for access to Chinese equity markets, and the listing of a new ETF reinforces London's position as a center for international finance."
The growth of overseas ETFs tracking Chinese shares comes as China opens up its stock markets for foreign investors by increasing quotas for foreign institutional investors to buy A-shares.
More significantly, stock connects between China's A-share markets in Shanghai and Shenzhen with Hong Kong are also rapidly allowing foreign investors to buy Chinese shares through Hong Kong. Hong Kong's offshore status means there are no restrictions on foreign investment.
