SHANGHAI, Jan 27 (Reuters) - The first exchange-traded fund (ETF) outside China that invests in Shanghai’s Nasdaq-style STAR Market starts trading on the New York Stock Exchange on Wednesday, testing Wall Street’s appetite for China-listed tech companies amid geopolitical tensions. The listing of the KraneShares SSE STAR Market 50 Index ETF comes as Washington has banned investment in more than 40 companies with alleged links to the Chinese military. STAR Market-listed chipmaker Semiconductor Manufacturing International Corp (SMIC) is on the list. New York-based Krane Funds Advisors, which manages the fund, has removed SMIC from the ETF, which nevertheless offers valuable investment opportunities, chief investment officer Brendan Ahern said. “We believe that KSTR provides exposure to these growth segments of China’s economy which are very difficult for investors to access today.” Another benefit of buying the ETF now is that it allows investors to buy into the stocks before more foreign inflows arrive, Ahern said. “We have the opportunity to own in advance of Northbound Stock Connect flow beginning next week,” he said, referring to the Connect scheme between Shanghai and Hong Kong. Qualified STAR Market stocks will be eligible for investment under Connect on February 1, paving way for future index inclusions by MSCI and other global index publishers. U.S. interest in China’s high-growth stocks highlights tensions between Wall Street’s pursuit of investment opportunities and Washington’s move to curb China’s expansion. The STAR Market, launched to help Chinese tech firms raise money locally, hosts companies in China’s most promising sectors such as next-generation IT, biotech and high-end equipment. Tom Masi, portfolio manager at U.S. investment management firm GW&K, said U.S. investors had to walk a fine line when deciding whether to be influenced by the political tensions between the United States and China. “I think they also have to be very, very mindful of their fiduciary responsibility, which is to generate a rate of return,” Masi said. “If they invest in political sentiment, it may be damaging the long term returns.” “World dynamics are undergoing a material shift to Asia... China is the best positioned of all the emerging market countries,” said Masi, whose Emerging Wealth Equity Strategy had a 48.3% exposure to China at the end of 2020. The KraneShares STAR Market ETF invests in the 50 biggest STAR-listed companies under the Qualified Foreign Institutional Investor (QFII) scheme, one of the main channels foreign investors use to buy Chinese stocks and bonds. Krane Funds Advisors is majority-owned by Chinese investment bank China International Capital Corp (CICC). (Reporting by Samuel Shen and Andrew Galbraith Editing by Vidya Ranganathan and Jane Merriman)