Chinese fund manager GF International launches MSCI China A International ETF

HONG KONG, July 27 (Reuters) - Chinese asset manager GF International Investment Management Ltd on Monday said it will launch an exchange-traded fund (ETF) tracking the MSCI China A International Index, becoming the first ETF in Asia to track the index. The index was introduced in June last year and represents the A share component of the MSCI Emerging Markets Index when the latter fully includes A shares - or stock traded in Shanghai or Shenzhen by mainland investors and some foreign institutions. The GFI MSCI China A International ETF is physical in nature meaning it invests in securities that replicate the composition of the index it tracks. GF expects the fund to be listed on the Hong Kong Stock Exchange on Wednesday. GF has set aside Renminbi Qualified Foreign Institutional Investor (RQFII) quota for the new ETF and will consider investing via the Shanghai-Hong Kong stock connect in the future, Chief Executive Nathan Lin said. China's A shares have historically exhibited low correlation to other asset classes and geographies, and so are often considered a means of diversification for global investors looking to reduce volatility of their returns. Yet A shares shed around a third of their value over three weeks earlier this month. The market has since stabilised after government support, but the Shanghai Composite Index remains far below the semi-official recovery target of 4,500 points. The A-share market is too big to ignore as it is currently one of the largest and most liquid markets in the world with foreign participation of less than 2 percent, said Rene Veerman, head of Hong Kong & Taiwan at U.S. index provider MSCI Inc . MSCI is the biggest provider to the equity ETF industry by number of licensed ETFs, with over 670 ETFs tracking MSCI indexes globally. Its global market share of year-to-date ETF asset flows is 34 percent. (Reporting by Michelle Chen; Editing by Christopher Cushing)