China ETF Investors Can Mix and Match Flavors

November 12th at 2:14pm by Max Chen

Exchange traded fund investors can now directly access Chinese A-shares through Deutsche Bank’s latest offering, but traders may have to incorporate other funds to gain total access to China’s market.

The db X-trackers Harvest 300 CSI China A-Shares Fund (NYSEArca: ASHR) has exposure to about two-thirds of the market capitalization of Chinese stocks, reports Eric Balchunas for Bloomberg.

A-shares include Chinese companies incorporated on mainland China that are traded on the Shanghai or Shenzhen exchanges. Foreign investors must qualify as a Renminbi Qualified Foreign Institutional Investor (RQFII) under Chinese regulations to trade A-shares.

Previously, investors could only access Hong Kong or U.S.-listed Chinese companies.

Looking at historic performance, ASHR’s underlying index, the Shanghai Shenzhen CSI 300 Index, has underperformed other U.S.-listed China ETFs. Over the past five years, the CSI 300 Index has gained 67%, whereas the S&P China BMI Index, the underlying index forĀ SPDR S&P China ETF (NYSEArca: GXC), returned 106%. [A China ETF with a More Diversified Approach]

The under-performance in the CSI 300 Index may be attributed to the heavy emphasis on financial stocks and the S&P China BMI Index’s tilt toward outperforming Chinese tech companies.

Since there are currently no single ETFs that provide something like a total Chinese market play, the fastidious investor could include an ETF like GXC, which tracks everything but Chinese A-shares, with ASHR for broader exposure to the Chinese market.

KraneShares also says it is close to launching its own Chinese A-shares ETF, the KraneShares Bosera MSCI China A ETF (KBA). [KraneShares Eyes Its Own China A-Shares Play]

Additionally, rival A-shares products such as the Market Vectors China ETF (NYSEArca: PEK) and the newly minted, actively managed PowerShares China A-Share Portfolio (NYSEArca: CHNA) hold swaps on A-shares indices, not actual stocks, though CHNA is seeking RQFII approval. [Deutsche Offers New Spin on China ETFs]

For more information on China, visit our China category.

Max Chen contributed to this article.