Deutsche Offers New Spin on China ETFs

While ASHR is a new spin on China ETFs, it does offer investors leverage to prominent areas of the China investment thesis. For example, Deutsche Bank China Strategist Lin Li noted on a conference call Monday that health care spending there could increase in the coming years as China looks to relax its one-child policy by 2016. [A Fundamental Approach to China ETFs]

“Foreign investment in China is currently about 1.5%, but to get to the goal of 11%, that would require a seven-fold increase,” said Deutsche Managing Director Martin Kremenstein on the call. “It is possible that foreign investment in China A-shares could reach the mid-teens.”

That prediction could prove prophetic. Although there is no shortage of diversified emerging markets ETFs that offer exposure to China, the country could take on an even more prominent role in those funds if the country’s fully liberalizes the A-shares market. That could force index providers to boost China to nearly a third of the weight in various emerging markets indices.

And that could be why Kremenstein called ASHR “the most exciting product we’ve launched in the past six years.”

In the futures, ASHR could also be a play on the growth of China as a legitimate emerging markets dividend destination,

“We’ll start to see dividends become more a part of the China story,” said Kremenstein. “I think we’ll see China become more dividend-focused.”

China is currently the largest emerging markets dividend payer in dollar terms.

Deutsche’s other emerging markets ETFs include the db X-trackers MSCI Emerging Markets Hedged Equity Fund (NYSEArca: DBEM) and the db X-trackers MSCI Brazil Hedged Equity Fund (NYSEArca: DBBR).