ETF of the Week: Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR)

ETF Trends CEO Tom Lydon discussed the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.

ASHR was the first U.S.-listed ETF to offer direct exposure stocks listed in mainland Chinese markets in Shenzhen and Shanghai. ASHR tracks an index of 300 biggest and most liquid stocks. Unlike some other ETFs that use derivatives to mimic A-shares, ASHR buys the stocks directly.

As it stands, China’s markets are rallying as Chinese retail investors jump into the markets. They were up with a 12% 1-week return, and +22% on a 1-month return. This comes from Beijing’s support of the stock market.

A state-owned China Securities Journal is accredited with spurring a strong rally in Chinese markets. The publication suggested that investors should herald the “wealth effect of the capital markets” and the future of a “healthy bull market.” Policymakers are telling retail investors that the market will go up, and it probably will for a while.

As far as risks go, precisely the same statements were had back in 2015. They tried to push the market higher, and it worked for a while, and then the market collapsed. This time around, policymakers are warning retail investors from selling the farm and betting on stocks.

China: First In, First Out

China was among the first to suffer the worst of the Coronavirus; it implemented lockdowns first to quarantine the outbreaks. The Asian economy may also be among the first to bounce back. While the world’s second-largest economy is still far from a full recovery from the coronavirus pandemic hit, economists remain hopeful that a series of increased economic momentum indicates China is returning to positive growth in the second quarter.

China’s official manufacturing purchasing managers index rose to a three-month high of 50.9 in June from 50.6 in May. Meanwhile, the separate nonmanufacturing PMI, a gauge of services and construction activity, advanced to a seven-month high of 54.4 from 53.6 in May. Both indices have locked in four consecutive months of readings above 50, which indicates an expansion in the sector.

Related: ETF of the Week: Direxion Work From Home ETF (WFH) 

While the export and import industries remain in a contraction, the segment has improved from the post-pandemic lows. The new export orders subindex, a gauge of external demand, rose to 42.6 in June from 35.3 in May. The subindex measuring imports also gained to 47.0 from 45.3 in May. China’s exports benefited from the production of medical equipment to fight the Coronavirus, and exports of other types of goods have recently added to the rebound.

The Xtrackers Harvest CSI 300 China A-Shares ETF is a more diversified and a more authentic representation of China. As noted, it tracks the CSI 300 Index and is designed to reflect the price fluctuation and performance of the China A-share market. The Chinese A-shares provides another layer of diversification. Investors use to gain exposure to Chinese companies through listed companies on the NYSE or Hong Kong. Chinese regulators are now loosening regulation to allow more foreign investors into mainland-listed China stocks.

Listen to the full podcast episode on ASHR ETF:

For more podcast episodes featuring Tom Lydon, visit our podcasts category.