db x-trackers, Deutsche Bank’s ETF platform, has launched a UCITS-compliant exchange-traded fund on Singapore’s SGX exchange to track the CSI 300 index, a representative benchmark for China “A” shares.

“A” shares have traditionally traded at a premium to other forms of Chinese securities such as “H” shares, “red chips” and “B” shares (as Cris Sholto Heaton of IndexUniverse.eu explained in a recent article) because they have only been accessible to domestic Chinese investors and to those with “qualified foreign institutional investor” (QFII) status.

For that reason, foreign tracker funds offering exposure to “A” shares, such as the iShares FTSE Xinhua A50 China Index ETF (the largest equity ETF in Asia, with US$5.5 billion under management) or the same issuer’s CSI 300 A-Share Index ETF, invest in equity derivatives to gain the market exposure.

Whereas the iShares funds use “China A-Shares Access Products” from a number of banks (primarily Citigroup, Credit Suisse, HSBC, Royal Bank of Scotland, UBS, Merrill Lynch and Barclays), according to the issuer’s Hong Kong website, the new db x-trackers ETF will use parent Deutsche Bank as the single swap counterparty. Collateral backing will be provided to the ETF to keep counterparty exposure below 10% of the fund’s net asset value, db x-trackers says, in line with the UCITS rules for European collective investment funds.  Many other A-Shares trackers are subject to uncollateralised or only partially collateralised counterparty risk, Deutsche Bank says.

This, the bank points out, will make the new Singapore-listed ETF accessible to European investors.

The db x-trackers CSI300 Index ETF is offered at an all-in fee of 0.5%, the lowest among China A-Shares ETFs in the market, according to Marco Montanari, head of db x-trackers Asia.

db x-trackers is also launching another UCITS-compliant ETF in Singapore. The db x-trackers MSCI Indonesia ETF is offered at an all-in fee of 0.65%.