sSEP 13, 2017 @ 08:41 AM534
I cover business and investing in emerging markets.
A road in Tajikstan in Eurasia. These vast land masses of old nomadic tribes are along China's new Silk Road: a massive means to export capital, labor and products to new markets, many of which are not even considered frontier markets yet by the MSCI.
China's new Silk Road has put a whole host of backwater nations in Eurasia on the map. Uzbekistan. Kazakhstan. Even tiny Georgia and Albania are getting in on the act, welcoming Chinese money for building out China's so-called One Belt One Road project, an ambitious government initiative designed to connect high value added manufacturers in China with new markets across the Eurasian landmass and into Europe. And now there's an ETF for that.
New York based investment company KraneShares launched their One Belt One Road (OBOR) fund on Sept. 8. It tracks the MSCI China Infrastructure Exposure Index. The fund is down 0.32% since its launch, but was still in a full cash position as of Sept. 11.
China's OBOR should be called ARLE, as in All Roads Lead to Europe. China's new Silk Road cuts through the Eurasian landmass into Europe. Investors hope Chinese companies will be able to develop new markets there for its goods. Think Lenovos in Kazakhstan and Uzbekistan instead of Dells and Macbooks. (Shutterstock)
“We believe the OBOR initiative is creating a new paradigm in global investing,” Jonathan Krane, KraneShares CEO said in a statement. “The OBOR initiative will receive trillions of dollars of investment over the next decade and should increase the economies and trade of both China and the participating nations.”
The 85 positions they hold at the outset are mostly Chinese, but a few countries along the Silk Road are on the list. Russian oil company Rosneft is the fund's second largest holding. Kazakhstan Gas is also on the list, along with companies from Turkey, Malaysia, Poland and Singapore to name a few.
The One Belt One Road initiative, as it is officially called, was established by President Xi Jinping two years ago. It mainly takes the old Silk Road trading routes by land and by sea and will try to modernize them and the economies along its route in an effort to better place Chinese labor, capital and products into new markets. It's an ambitious endeavor, and one in which China specialists at Krane think they can capitalize on with this new fund.
Because of this new project, China has signed cooperation agreements with 68 countries and international organizations representing 62.3% of the global population and 30.0% of global GDP. Some estimate needs of around $6 trillion in investment needed to develop these countries, nearly all of them frontier markets, with a few emerging market players in Southeast Asia and Russia.
All together the OBOR initiative will connect 69 countries (including China), representing an aggregate population of 4.5 billion and a nominal GDP of $23 trillion.
KraneShares will host an OBOR summit in New York in January