Investors will have more investment options to choose from when considering China equities as the second round of its quality issues, China A Shares, is included in the FTSE Russell global equity indexes.
As part of FTSE Russell’s ongoing inclusion of China A Shares to its global equity benchmarks,
the implementation of Tranche 2 (40% proportion) has taken place:
- The inclusion began in June 2019 and follows ongoing enhancements to China’s market
access, governance standards and regulation
- China A Shares are now part of the FTSE Emerging Index, tracked by approximately $140
billion in assets under management.
- China A Shares will represent approximately c. 5.5% of the FTSE Emerging Index once fully
implemented in Phase 1 in March 2020
- FTSE Russell was the first international index provider of mainland China benchmarks 20
years ago. Approximately US$27 billion of AUM is benchmarked to or tracking FTSE China
FTSE Russell’s implementation of China A Shares to its global equity benchmarks is scheduled across three separate tranches. Investability weights and key dates are included below.
“The completion of the second tranche of A Share inclusion is in line with our approach of gradually increasing the weight of mainland Chinese equities in our global indexes,” said Jessie Pak, Managing Director, Asia, FTSE Russell. “We received positive feedback from index users on our initial tranche of over 1000 small, mid and large-cap China A Shares in June, with many asset managers adjusting their portfolios as part of the inclusion process.”
“The addition of China A shares to our global indexes is based on long-term analysis informed by
frequent dialogue with regulators, exchanges, and feedback from the global investor community,” Pak added.
China ETF Plays
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. 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.
China is beginning to deregulate access to its markets in order to pave the way for more foreign investments to a variety of asset classes. That being said, the capital flowing into China will turn from a trickle into a full-fledge gush if it hasn’t already.
In essence, ASHR is 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 other ETFs, ASHR provides a more diversified representation of gaining access to the world’s second-largest economy.
For leverage-hungry traders, other ETFs to play include the Direxion Daily FTSE China Bull 3X ETF (NYSEArca: YINN), Direxion Dly CSI 300 China A Share Br 1X ETF (NYSEArca: CHAD), Direxion Daily CSI 300 CHN A Share Bl 2X ETF (NYSEArca: CHAU), and Direxion Daily CSI CHN Internet Bull 2X Shares (NYSEArca: CWEB).
For more market trends, visit ETF Trends.