“We continue to see China’s economic transition as ongoing, yet we expect a nonlinear growth path as policymakers juggle between fiscal and monetary stimulus, and structural reform,” according to a BlackRock research note. “After months of slow and steady devaluation, the renminbi has found some stability; the currency will be added next month to the IMF Special Drawing Rights basket, which should provide further support.”
Consequently, investors interested in gaining exposure to the potential growth spurt ahead, as China implements greater reforms and opens its market, can look to a number China country-specific ETFs.
Investors can access Chinese markets directly through options like the VanEck Vectors ChinaAMC SME-ChiNext ETF (NYSEArca: CNXT), VanEck Vectors ChinaAMC CSI 300 ETF (NYSEArca: PEK), iShares MSCI China A ETF (BATS: CNYA) and db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR).
PEK tracks the CSI 300 Index, which includes the 300 largest and most liquid stocks in the China A-shares market. CNXT includes the 100 largest China A-shares stocks listed on the Small and Medium Enterprise Board and the ChiNext Board of the Shenzhen Stock Exchange. CNYA tracks an MSCI index composed of Chinese equities listed on the Shanghai and Shenzhen Stock Exchanges. ASHR also tracks A-shares taken from the CSI 300 Index.
Moreover, investors can gain exposure to China through the iShares China Large-Cap ETF (NYSEArca: FXI) and SPDR S&P China ETF (NYSEArca: GXC), which track Chinese companies listed on the Hong Kong stock exchange. These H-shares China ETFs are trading at attractive valuations. FXI shows a 9.78 price-to-earnings and a 1.09 price-to-book, and GXC has a 10.71 P/E and a 1.18 P/B, compared to ASHR’s 13.73 P/E and 1.59 P/B. With greater reforms and liberalization of Chinese markets, H-shares may begin to outperform A-shares as the two markets begin to move closer in line with one another.