More exchange traded fund investors have turned to the Chinese A-shares market this year, riding the ups and downs of the emerging market, but they are also exposed to currency risks, especially as Beijing seeks to loosen control over the foreign exchange market.
Nevertheless, ETF investors interested in China’s A-shares domestic market but wary of a depreciating yuan currency can look at two currency-hedged China A-shares ETFs that came to market Tuesday.
Deutsche Asset and Wealth Management launched the Deutsche X-trackers CSI 300 China A-Shares Hedged Equity ETF (NYSEArca: ASHX) Tuesday, according to a press release. ASHX has a 0.85% expense ratio.
“With ASHX we aim to capture the growth of one of the world’s fastest-growing economies, while minimizing exposure to currency volatility,” Fiona Bassett, Head of Passive in the Americas, said in the press release.
Specifically, ASHX tracks the CSI 300 USD Hedged Index, which is designed to provide direct access to China A-shares while diminishing the negative effects of a depreciating Chinese yuan currency against the U.S. dollar – a weaker foreign currency means that returns are also lowered when converted into U.S.-dollar-denominated returns. The CSI 300 Index covers the 300 largest A-shares on mainland Shanghai and Shenzhen exchanges.
ASHX basically acts like a currency-hedged version of the popular Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR), which has $564.1 million in assets under management.
Sector allocations include a heavy tilt toward financials 38.5%, along with industrials 18.1%, consumer discretionary 10.6%, information technology 6.9%, materials 6.7%, consumer staples 5.6%, health care 4.3%, utilities 4.5%, energy 2.9% and telecom services 0.9%.
Current holdings include a full ASHR position, along with short CNH currency contracts.