Exchange traded fund (ETF) investors looking to diversify their portfolios outside the U.S. can look to China’s A-shares in large- and mid-cap companies with the KraneShares Bosera MSCI China A ETF (KBA).

KBA seeks to provide investment results that correspond to the price and yield performance of the MSCI China A Index (USD). The underlying index reflects the large- and mid-cap Chinese renminbi-denominated equity securities listed on the Shenzhen or Shanghai Stock Exchanges (A-Shares) that are accessible through the Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect programs.

As published on the KraneShares website, KBA gives investors:

  • Access to the Shanghai and Shenzhen Stock Exchanges, which have been historically difficult to access
  • The MSCI China A Index, which reflects a 20% inclusion factor for China A large cap, mid cap, and eligible ChiNext shares within the MSCI Emerging Markets Index
  • Over $1.8 trillion benchmarked to the MSCI Emerging Markets Index.
  • Co-management by Bosera Asset Management, which boasts over $151 billion in AUM.

KBA Chart

What’s Next for China?

After its economy was in the eye of the storm during the Covid-19 pandemic, China may be an ideal re-opening play. With momentum on its side, now is an ideal time for A-shares exposure.

“From here on, we expect the momentum will continue, but it will be of a slightly different nature,” said Ronald Chan, chief investment officer, equities, Asia (ex-Japan) at Manulife Investment Management. “The demand in China for leisure, domestic travel, gaming and cinemas will all improve. Another ingredient is the demand from the U.S. for Chinese goods, given America’s stimulative monetary and fiscal policies. China, as the manufacturer of the world, should benefit.”

Moreover, the prospects for growth are high as China looks to become more independent.

“One of the things that China has that many emerging markets countries don’t have is that it is self-sustaining,” said Dan Chace, portfolio manager at Wasatch Global Investors. “We think the prospects for growth are very strong. You can’t put that genie back in the bottle. We’re positive that from China’s dual-circulation strategy, there will be growth from a domestic demand component and also from an export component.”

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