Many global asset managers are also waiting on MSCI’s decision Tuesday on including Chinese mainland stocks in its global indices. MSCI will announce its decision late Tuesday, 5pm Eastern Time, according to AsianInvestor. If MSCI adds A-shares to its benchmark Emerging Markets Index, it would force investors to hold more Chinese equities, which would increase demand and lift prices. [Waiting on MSCI, A-Shares ETFs Rally]
Zhu also expects the Shenzhen-Hong Kong Stock Connect program to bolster the H-shares market as mainland investors shift into cheaper Hong Kong-listed Chinese companies. Hong Kong stocks have increased 15% year-to-date, whereas Shanghai and Shenzhen stocks surged 57% and 110%, respectively.
“We would expect to see more [mainland]domestic liquidity flow into the Hong Kong market , ” Zhu said.
Moreover, Zhu favors H-share banks, property developers and small- and mid-sized companies.
ETF investors can also gain exposure to the bank and real estate sectors through the Global X China Financials ETF (NYSEArca: CHIX), which includes 47.8% banks and 21.7% real estate, and the Guggenheim China Real Estate ETF (NYSEArca: TAO), which tracks publicly traded companies and real estate investment trusts that derive the majority of their revenue from properties in China and Hong Kong.
The Guggenhiem China Small Cap ETF (NYSEArca: HAO) and iShares MSCI China Small Cap Index Fund (NYSEArca: ECNS) both focus on the smaller segment of the Chinese market. HAO includes 13.4% small-caps and 43.1% mid-caps. ECNS has a larger 34.5% tilt toward small-caps and 61.7% in mid-caps.
For more information on the Chinese markets, visit our China category.