Chinese companies listed in the U.S. took a pummeling last year as foreign investors reacted to regulations within China, but for Chinese stocks on the mainland, it was business as usual. Onshore stocks grew nearly 20% last year in China, while Chinese stocks listed in U.S. markets fell 42% for the year, reports the Wall Street Journal.
Mainland China’s markets grew to around $12.7 trillion in 2021, proving that regulatory fears and uncertainty are largely focused outside of the country. The Shanghai Composite Index grew 4.8% year-over-year as of December 31, 2021, and an influx of new listings on the Shanghai and Shenzhen Exchanges brought growth to markets overall, making China the second biggest equity market globally.
Onshore Chinese stocks rose 20% last year, according to the S&P Global Market Intelligence data, reflecting a growth of $2.1 trillion; only companies that were currently listed with either exchange as their primary listing were included in the data set.
This growth mirrors that seen in U.S. markets, with a 23% increase in market cap for stocks listed on any of the major exchanges in the U.S. However, Chinese stocks listed on U.S. exchanges experienced a loss of $758 billion as investors vacated their positions in China, reflecting a 42% drop.
“It is a time when China wants to shift the focus to furthering its capabilities in advanced technologies and manufacturing. The A-share market has companies that are doing that,” said Louis Lau, director of investments at Brandes Investment Partners. A-shares are the onshore stocks for China.
Investing in China’s Onshore Performance With KBA
For investors looking for exposure to China’s economy and the A-shares market that continued to grow last year through the regulatory pressures and restructuring, the KraneShares Bosera MSCI China A Share ETF (KBA) invests in Chinese A-shares — specifically, the MSCI China A Share Index.
The ETF captures mid-cap and large-cap representation of Chinese equities listed on the Shenzhen and Shanghai Stock Exchanges, which have been historically closed to U.S. investors. At $738 million in assets under management, KBA remains the largest MSCI-linked China A-share ETF available in the U.S.
Holdings in KBA include Kweichow Moutai, a major alcohol producer in China, at 5.78%; Contemporary Amperex Technology, a Chinese battery manufacturer, at 3.08%; and China Merchants Bank, the first shareholder commercial bank to be entirely owned by corporate legal groups in China, at 2.26%.
KBA carries an expense ratio of 0.59%.
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