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Here Come the Chinese ETF Investors

by Don Dion

Caijing reports that the Chinese government has allowed two fund companies to list overseas funds. China Asset Management plans a fund to track the Hang Seng Index, while Penghua Fun Management plans ETFs, with licenses for the MSCI U.S., MSCI Emerging Markets and MSCI EAFE indices. These new funds could begin trading next year, but don't expect too much of a boost to global markets at first, because they will be managed under the Qualified Domestic Institutional Investor program that will limit the amount of capital allowed to flow outside the country. Capital restrictions could cause the ETFs to trade at a premium and would provide a gauge of Chinese demand for foreign assets. Some economists have speculated that the Chinese yuan would weaken if it were floated now, because of this pent-up demand. It's speculation at this point, but a premium on ETFs of...

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