There are over 260 exchange traded products offering exposure to China, the world’s second-largest economy.
Even when the multi-country ETFs and sector funds with heavy China exposure, think alternative energy plays among others, are excluded, investors are still left with a long list of China-specific ETFs. That list includes traditional fare such as the iShares China Large-Cap ETF (NYSEArca: FXI) and focused concepts, including the Global X China Financials ETF (NYSEArca: CHIX). [Focus on China Financials]
Another way of looking at China ETFs is like this: There is no dearth of offerings, so new China ETFs are not needed by investors and it should be, at least in theory, difficult for new China ETFs to really standout. The db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR) proves a properly positioned rookie China ETF can thrive, not just exist.
ASHR is not yet two months old and it is already flirting with $200 million in assets under management, indicating investor interest in gaining exposure to China’s previously hard-to-access A-shares markets of Shanghai and Shenzhen is strong. [Some New ETFs are Off to Fast Starts]
“The China A-shares market has long been recognized as one of the world’s most coveted investment opportunities. Chinese A-shares are representative of world’s second-largest economy and yet in the past they have been notoriously difficult for foreign investors to access,” said Deutsche Asset & Wealth Management Managing Director Martin Kremenstein in an email exchange with ETF Trends.
“The A-share market also offers a broader opportunity set than other Chinese investment markets like H-shares. Many sectors and companies in China are only available via China A-shares, meaning the ability to invest in China A-shares opens up a broader investing universe. ASHR seeks to track the CSI 300 Index, which is the S&P 500 equivalent in China and comprised of the 300 largest and most liquid stocks in the China A-shares market.”
There are other reasons to consider ASHR, and at least one that in part explains the new ETF’s positive returns and asset-gathering acumen: Exposure to the much-ballyhooed China consumer story. Although nearly 40% of ASHR’s weight is allocated to financial services firms, 26% combined goes to consumer to stocks, which is better consumer exposure than is offered by traditional H-shares focused ETFs. [Getting Choosy With China ETFs]
“Market risk is obviously a factor, but ASHR eliminates the additional inherent risks related to instruments like swaps and derivatives. ASHR also provides more access to domestically focused companies than H-Share based products,” said Kremenstein.
ASHR’s debut was well-timed. The ETF came to market just as investors started nibbling at Chinese stocks again and now the fund is known entity as more strategists are highlighting China as one of the better emerging markets ideas for 2014.
Still, Chinese stocks are inexpensive, particularly those in the A-shares markets of Shanghai and Shenzhen. Stocks in Shanghai and Shenzhen are nowhere close to the all-time highs set in 2007 and 2008. [An ETF to Gain Direct Access to China A-Shares]
“China is one of the world’s fastest-growing major economies with a gross domestic product (GDP) of approximately $8 trillion and growth rates averaging 9% over the past 30 years,” added Kremenstein. Moreover, we see a number of factors that could support the Chinese economy over the long term and therefore A-shares. There are structural factors, such as growth in consumption and urbanization, that are likely to support economic growth for quite a while.”
db X-trackers Harvest CSI 300 China A-Shares Fund
