U.S. President Donald Trump’s tweeting may have just paved the way for investors to purchase China-focused exchange-traded funds (ETFs) at a relative discount. As these ETFs continue to get roiled in the latest trade talk news, it gives investors the opportunity to buy in at a cheap price.
China dropped the price of their currency to an almost a historic low. It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!
— Donald J. Trump (@realDonaldTrump) August 5, 2019
“The United States disregards the facts and unreasonably affixes China with the label of ‘currency manipulators,’ which is a behavior that harms others and oneself,” the People’s Bank of China said in a statement on Tuesday. “The Chinese side firmly opposes this.”
However, where does an investor start when they want to get a piece of the world’s second largest economy? One way is through exchange-traded funds (ETFs), but that begs another question: which one?
While companies can gain access to the largest companies in China via the iShares China Large-Cap ETF (NYSEArca: FXI), there is one caveat–the majority of the holdings in the guts of the ETF consist of state-owned enterprises where the government prevents full autonomy of these companies.
Ongoing trade negotiations between the U.S. and China, which have revolved around a wide range of issues, such as forced technology transfer and now the withdrawal of China purchasing U.S. agricultural products. The tariffs were meant to force China’s hand in changing its business practices, particularly when it comes to issues, such as intellectual property–all as a means to get China to open up its economy to more foreign investors.
As such, one ETF to consider is the Xtrackers Harvest CSI 300 China A ETF (NYSEArca: ASHR) as a way for investors to gain exposure to China’s biggest, best and most authentic equities. The fund is up 32 percent thus far YTD.
ASHR seeks investment results that track the CSI 300 Index that is designed to reflect the price fluctuation and performance of the China A-Share market. In essence, it’s composed of the 300 largest and most liquid stocks in the China A-Share market, including small-cap, mid-cap, and large-cap stocks.
Without a majority of its holdings in state-owned enterprises compared to FXI, ASHR provides a more authentic and diversified representation of gaining access to the world’s second largest economy.
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