UOB has launched the UOB Xinhua China A50 ETF recently. This ETF will track FTSE Xinhua/China A50 index and this index is designed to track the top 50 China A-shares companies by their market capitalization. A-shares are stocks of China companies which are listed in the Shenzhen or Shanghai stock exchange and these shares are listed and denominated in Chinese Yuan. These A-shares can only be owned by Chinese Nationals or Qualifed Foreign Insituitional Investors (QFII) as approved by the China Securities Regulatory Commission (CSRC)

The prospectus of this ETF can be downloaded here. Personally, I have taken a look at the prospectus and I do think that UOB has done a good job in explaining how this ETF works although it is still quite complex. I have taken snapshots of the important information of this prospectus.




After reading through some parts of the prospectus, I feel that the model of this ETF is rather complex. For a start, one is not holding directly to the A-shares of the China companies in the index but is actually holding on to the participatory notes known as P-notes, which is a synthetic representation of the A-shares. These P-notes have some terms and conditions which I am not too comfortable with and these are listed further in the prospectus which you can read about. Besides, both tranches of P-notes are essentially issued by Rabobank and this brings up the issue of counterparty risk.