“Assuming full inclusion of China A-Shares, for example, China’s weight in the MSCI Emerging Markets Index could increase from its current 19% to more than 31%,” Noack added. “Deutsche Bank research also predicts that China could witness inflows of more than $180 billion as a result of this change. In addition to driving up share prices, these inflows would likely improve market liquidity and stability, which could in turn potentially attract $500 billion to $1.5 trillion of inflows in the medium to long term.”
More global investors may soon increase allocations to China if MSCI begins including A-shares into its benchmark emerging market index. While MSCI is still working out the details, FTSE global equity indices have started including A-shares.
In the mean time, ETF investors have a number of China A-shares options to track stocks that trade in Shanghai or the Shenzhen indices. For instance, the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR), the largest U.S-listed A-shares ETF, targets the 300 largest and most liquid stocks in the China A-shares market.
The Deutsche X-trackers Harvest CSI 500 China A-Shares Small Cap Fund (NYSEArca: ASHS), which track more mid-sized Chinese A-shares, includes Chinese A-shares taken from the China Securities 500 Index, stocks listed in Shanghai and Shenzhen.
Additionally, the Deutsche X-trackers Harvest MSCI All China Equity Fund (NYSEArca: CN) allows investors to track mainland Chinese stocks, with a 46.7% position in ASHR and 16.3% in ASHS, and the fund holds Chinese stocks listed in the U.S. and Hong Kong. For instance, CN includes 3.5% in Tencent, 1.9% in Baidu and 1.8% in Alibaba Group.
Financial advisors who are interested in learning more about China’s market can listen to the webcast here on demand.