Vanguard, the second-largest U.S. issuer of exchange traded funds, procured a massive renminbi qualified foreign institutional investor (RQFII) quota from Chinese regulators as the Pennsylvania-based fund giant looks to add China A-shares to some of its international and emerging markets funds.
Those plans include the previously announced addition of A-shares to the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), the largest emerging markets ETF by assets.
“Vanguard Group garnered a 20 billion renminbi ($3 billion) quota from Chinese regulators on Jan. 29 for investment in Shanghai- and Shenzhen-listed A shares, China’s largest single quota award since foreign investors gained their first, limited access to the country’s capital markets in 2003,” reports Douglas Appell for Pensions & Investments.
In early November, VWO started tracking the new FTSE transition index that will begin building exposure to small-capitalization stocks and China A-shares before finalizing the switch to the FTSE Emerging Markets All Cap China A Inclusion Index, according to Vanguard Group.
VWO will follow a transition index for approximately one year to diminish costs associated with the huge amount of securities that will need to be acquired. Specifically, the fund will sell large- and mid-cap stocks on a monthly basis while proportionally adding China A-shares and small-cap ex China A-shares.