Investors who are looking into Chinese equities may find better value in China A-shares and related exchange traded funds.
The CSI 300 Index, which tracks stocks listed on the Shanghai and Shenzhen exchanges, trades at a price-to-earnings ratio of less than 10, the lowest in over a decade, while Chinese shares listed on the Hong Kong exchange trades at a multiple of 12.8, reports Rupert H for ValueWalk.
Looking at China’s Hang Seng China AH Premium Index, which measures the premium, or discount, of A-shares to H-shares, the index sits at around 91.15, or 1.2% below the last two days close. The benchmark uses a simple 0 to 100 scale measurement, with readings equal to or greater than 100 reflecting A-shares are trading on paror at a premium to H-shares on average.
However, given the current reading, the index indicates that Chinese A-shares are trading at a 9.7% discount to H-shares. Additionally, the index is at a five-year low, indicating that A-shares are trading at their largest discount to H-shares in five-years. In comparison, the index has averaged 110 over the past five-years.
With recent new additions to the ETF market, investors can now track the Chinese A-shares market. The db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR) and Market Vectors ChinaAMC A-Share ETF (NYSEArca: PEK) both track the CSI 300 Index. The KraneShares Bosera MSCI China A ETF (NYSEArca: KBA) tracks the MSCI China A Index. The PowerShares China A-Share Portfolio (NYSEArca: CHNA) is an actively managed option that utilizes SGX FTSE China A50 Index futures contracts. [A Chinese Buffet With This New ETF]