Shenzhen is the China-equivalent of Silicon Valley in the United States and inflows of capital into the area is a promising sign that could bode well for certain China-focused exchange-traded funds (ETFs).
“The city of Shenzhen, China’s tech capital that sits on the border with Hong Kong, barely avoided an economic contraction in the first half of this year, as a strong rise in investment offset weaker consumer spending and exports,” noted a South China Morning Post article.
One economic notable is how well the region did in comparison with the rest of the country.
“Transformed from a small village adjoining Hong Kong in the last four decades, the mainland city’s gross domestic product (GDP) rose only 0.1 percent in the first half from the year-earlier period, its statistics bureau said on Tuesday,” the article said. “Shenzhen fared better than the nationwide contraction of 1.6 percent in the first half.”
If cities like Shenzhen can pick up the slack for the rest of China, then one way to get Chinese equity exposure is via the Xtrackers MSCI All China Equity ETF (CN). CN seeks investment results that correspond to the performance, before fees and expenses, of the MSCI China All Shares Index.
The fund will normally invest at least 80% of its total assets in securities of issuers that comprise either directly or indirectly the underlying index or securities with economic characteristics similar to those included in the underlying index. The underlying index is designed to capture large- and mid-capitalization representation across all China securities listed in Hong Kong, Shanghai, and Shenzhen.
Here are two more options to consider as China continues its recovery:
- Xtrackers CSI 300 China A-Shares ETF (NYSEArca: ASHR): seeks investment results that correspond generally to the performance, before fees and expenses, of the CSI 300 Index. The fund will normally invest at least 80% of its total assets in securities of issuers that comprise the underlying index. The underlying index is designed to reflect the price fluctuation and performance of the China A-Share market and is composed of the 300 largest and most liquid stocks in the China A-Share market. The underlying index includes small-cap, mid-cap, and large-cap stocks.
- Xtrackers MSCI China A Inclusion Equity ETF (NYSEArca: ASHX): The investment seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI China A Inclusion Index. The fund will normally invest at least 80% of its total assets in securities (including depositary receipts in respect of such securities) of issuers that comprise the underlying index. The underlying index is designed to track the equity market performance of China A-Shares that are accessible through the Shanghai-Hong Kong Stock Connect program or the Shenzhen-Hong Kong Stock Connect program.
For more market trends, visit ETF Trends.