Concerned about U.S. Valuations? The 'ASHR' ETF Is Thriving in China

China is well on its way to recovery, with the MSCI China Index up about 26%. Look for funds like the Xtrackers CSI 300 China A-Shares ETF (ASHR) to prosper.

ASHR seeks investment results that correspond to the CSI 300 Index. The underlying index is designed to reflect the price fluctuation and performance of the China A-Share market and is composed of the 300 largest and most liquid stocks in the China A-Share market.

The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) was the first U.S.-listed ETF to offer direct exposure stocks listed in mainland Chinese markets in Shenzhen and Shanghai. Unlike some other ETFs that use derivatives to mimic A-shares, ASHR buys the stocks directly.

ASHR has weathered significant disruptions in the A-shares market, but investors should be aware that tracking can diverge from the index. Investors should be aware that ASHR does not invest in Chinese companies listed outside mainland markets, so popular stocks listed solely in Hong Kong won’t be in its portfolio.

ASHR is outperforming the MSCI China Index by about 13% within the past year:

^MSCN Chart

The Road to Recovery in China

As a Wall Street Journal article notes, “China ended the Year of Covid in many ways stronger than it started, accelerating its movement toward the center of a global economy long dominated by the U.S. While the U.S. and Europe wait for vaccine rollouts to get fully back on track, China is the only major economy expected to report growth for 2020, helping it close the gap with the U.S.”

“It has expanded its role in global trade and shored up its position as the world’s factory floor, despite years of U.S. efforts to persuade companies to invest elsewhere. China’s consumer market—lifted by its quick recovery from Covid-19—keeps gaining momentum, making it a bigger driver of global companies’ earnings,” the article added. “And the country has solidified its standing as a force in global financial markets, with a record share of initial public offerings and secondary listings in 2020, large capital inflows into stocks and bonds, and indexes that far outperformed even the U.S.’s strong showing.”

China doesn’t look to be stopping there either.

“The upshot is a world more reliant on China for growth than ever before,” the article continued. “For 2020, China’s economy is expected to account for 16.8% of global gross domestic product, adjusted for inflation, according to forecasts by Moody’s Analytics. That’s up from 14.2% in 2016, before the U.S. and China entered a trade war. The U.S. is expected to make up 22.2%, virtually unchanged from 22.3% in 2016.”

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