Believe it or not, in more sanguine environments, ASHR, the largest A-shares ETF trading in the U.S., can actually reduce portfolio risk.
From the perspective of an investor who currently holds only the S&P 500 (i.e., starting with the bottom point), incremental 10% allocations to the CSI 300 reduced risk and increased return – the hallmark of a strong diversifier. In terms of improved return per unit of risk, the potential point of risk-return optimization comes at around a 45% allocation to A-shares and 55% to the U.S. – a far higher holding than many would probably have considered reasonable (and indeed, given limitations on foreign investment, one that is not yet fully implementable),” adds Kittsley.
Another option for investors to consider is the Deutsche X-trackers Harvest MSCI All China Equity Fund (NYSEArca: CN). While not a pure A-shares ETF, CN is close with a combined 62% of its weight allocated to ASHR and ASHS.
Additionally, CN is a valid avenue to China’s booming Internet story as technology and consumer discretionary names combine for almost 24% of the fund’s weight. That group includes well-known names such as Alibaba (NYSE: BABA), Baidu (NasdaqGS: BIDU) and Tencent (OTC: TCEHY).
ETF Trends editorial team contributed to this post.