Kimco launches A-share ETF in Korea

Korea Exchange (KRX) will list Kindex CSI300 ETF on its exchange today. This ETF is the first China A-share index ETF to be created in Korea, and it will be managed by Korea Investment Management Company (Kimco). It has an underlying index of CSI300, tracking stocks on both the Shanghai and Shenzhen bourses.

Kimco received a $100 million QFII quota from Chinese authorities in July specifically for this product. In the event that foreigners are allowed to invest in index futures contracts, the ETF will be allowed to leverage two times, although today this remains off limits.

KDB Daewoo Securities, Woori Investment and Securities, Korea Investment and Securities, and Hyundai Securities are liquidity providers. Kookmin Bank will serve as custodian bank.

This ETF will be the 28th ETF product listed on the KRX this year, bringing the total number of ETFs in Korea to 134. It is the eighth international ETF to be listed in Korea, including the W77 billion Kodex China H Share ETF (Samsung Asset Management), the W12 billion Mirae Tiger China ETF and the W11 billion Mirae Tiger Latin America ETF.

The CSI300 hit its highest level at 5,877.2 points in October 2007, but the current level is around 2,164 (as of November 20). The return over the past 3 years is -40.18% and this year YTD is -6.53% as of November 23.

Suh Jung-do, head and managing director of alternative and global investments at Kimco, says the ETF will give investors better liquidity on a daily basis compared to existing China A-share fund products available in Korea. It is also cheaper, with fees at 70 basis points.