‘Nasdaq of China’ Is Coming to U.S. Investors Through New ETF

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For U.S. investors, getting a chance to take part in Shanghai’s Nasdaq-style tech board just got a whole lot easier with the inception of a new exchange-traded fund.

The KraneShares SSE STAR Market 50 Index ETF, which starts trading Wednesday, is the first fund listed in the U.S to provide access to the China technology bourse known as the Star market. It charges a 0.89% expense ratio.

The Star board, which is part of the Shanghai Stock Exchange, is home to the nation’s new economy listings in sectors like software and biotech. It’s known for relaxed rules on listing and trading, part of China’s attempt to minimize red tape.

The launch of the ETF, about a year and a half after the experimental board started trading, comes at a time when strained U.S.-China relations are expected to thaw under the new Biden administration. Retail investors will also gain access to the recent euphoria sweeping Chinese equity markets, driven by supportive fiscal stimulus and a rebound in the world’s second-largest economy.

The Star 50 Index is on track for its best monthly gain since its inception five months ago while China’s CSI 300 Index is trading near 13-year highs. China’s central bank chief also hinted this week at the possibility for Ant Group Co. to resume plans for an initial public offering, which would be a big win for the board.

‘Nasdaq of China’ Is Coming to U.S. Investors Through New ETF

“A lot of U.S. investors are looking at new China plays in the onshore market, and there aren’t a lot of ways to play that in the U.S.,” Brendan Ahern, chief investment officer at Krane Fund Advisors LLC, said by phone. “The Star board companies have a very low level of foreign ownership. The ETF gives investors an easy way to buy these new China firms.”

The ETF will track the performance of the Star 50 Index, a benchmark that consists of some of China’s bigger technology firms. Some of the members of the gauge include top chipmaker Semiconductor Manufacturing International Corp., which has more than doubled since its debut in July, while Beijing Kingsoft Office Software Inc. has surged nearly 10-fold since its November 2019 IPO.

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