China ETFs: An Emerging Market Too Big to Ignore

“China’s rapid GDP growth suggests its ability to support an increasingly large equity market,” Bush said.

China A-shares are comprised of stocks of companies incorporated in China and traded on the Shanghai and Shenzhen stock exchanges. A-Shares are the largest Chinese share class. Investors are Chinese nationals and foreign institutional investors authorized under the Qualified Foreign Institutional Investors (QFII) program.

Most investors may be acquainted with Chinese H-shares or N-shares. H-shares are stocks of companies incorporated in China and traded on the Hong Kong stock exchange. N-Shares are stocks of companies incorporated in China but listed and traded on the New York Stock Exchange. The majority of China country-specific ETFs available cover indices based off these Hong Kong- or NYSE-listed Chinese company stocks.

Potential investors who are interested in taking a direct look into China’s market have a number of options available. Sean Edkins, Director and Head of ETF Sales and Strategic Partnerships for DWS Asset Management, outlined several options at DWS, including the Xtrackers MSCI All China Equity ETF (NYSEArca: CN), Xtrackers CSI 300 China A-Shares ETF (NYSEArca: ASHR), Xtrackers CSI 500 China A-Shares Small Cap ETF (NYSEArca: ASHS) and Xtrackers MSCI China A Inclusion Equity ETF (NYSEArca: ASHX).

ASHR is the largest U.S-listed A-shares ETF and targets the 300 largest and most liquid stocks in the China A-shares market.

ASHS tracks more mid-sized Chinese A-shares, including Chinese A-shares taken from the China Securities 500 Index, stocks listed in Shanghai and Shenzhen.

CN has a broader portfolio, allowing investors to track mainland Chinese stocks, with a 30.6% position in ASHX and 4.8% in ASHS, and the fund holds Chinese stocks listed in the U.S. and Hong Kong.

Lastly, ASHX, which recently switched its underlying index to the MSCI China A Inclusion Index, tracks the progressive partial inclusion of A shares in the MSCI Emerging Markets Index over time.

Financial advisors who are interested in learning more about China market opportunities can watch the webcast here on demand.