ETF Chart of the Day: The Arugment for A-Shares

We speak about upside call activity in the largest China equity based ETF FXI (iShares China Large Cap, Expense Ratio 0.73%) this morning in our options recap, which leads us to a quick examination of some much smaller and less prominent funds in the China equity space that may benefit from a rally in the local markets.

So instead of starting at the top, we will go in reverse and begin at the bottom, and quickly exam the smallest China based equity ETFs in the U.S. landscape. CHNA (PowerShares China A-Share Portfolio, Expense Ratio 0.50%) launched in October of 2013, so recently celebrating its one year birthday, but the product has only managed to raise about $2.5 million in assets under management since inception.

KFYP (KraneShares CSI New China, Expense Ratio 0.68%) is a bit more esoteric than the A-Share focused CHNA, as it focuses on Chinese companies that are involved in the China government’s Five-Year Plan, known as the “FYP.”

Thus KraneShares seems to have chosen the KFYP ticker symbol for familiarity’s sake. KFYP remains small at the moment, having debuted in July of 2013 and has about $3.4 million in AUM and very low daily trading volume.

Top company weightings in KFYP include some well -known names here in the U.S. like the top weighted Tencent Holdings Ltd. (>18.1%), and BIDU (>16.7%). As one can see, more than 34% of the portfolio lies in those two names, with lesser exposures to companies like Want Want China Holdings Ltd. (>2.1%), Hengan International Group Co Ltd. (>1.7%), and Ctrip.com International Ltd. ADR (>1.6%). In total there are two hundred two individual names owned in the portfolio, but the fund by nature has a heavy mega/large cap slant (>86%) of the index at the moment.

The next smallest China equity ETP product is also from KraneShares, KBA (KraneShares Bosera MSCI China A, Expense Ratio 1.10%) which like CHNA, is an A-Share focused offering.

A-Shares may not be on everyone’s menu in terms of their investment portfolios, but no one can deny that the Chinese retail investor is more active than ever in investing and stock trading potentially, and the global linkage of markets simply opens
more opportunities for asset growth for such products, listed here as well as in China.