In contrast, many of the other China-related ETFs have a large overweight allocated toward the financial sector, which includes a large number of state-owned names.
“Most fund managers investing in China are wary of financials, and in particular the big banks, because you just don’t know what you’ve got — they’re so opaque,” Darius McDermott, managing director at Chelsea Financial Services, told the Financial Times.
However, investors have enjoyed a good run in Chinese A-shares names as these shares outperformed H-shares over shorter time periods. Over the past five years, FTSE China A50, which includes the largest 50 Chinese domestic stocks and acts as the underlying index for the CSOP FTSE China A50 ETF (NYSEArca: AFTY), was the best performing index.
Additionally, the CSI 300, which is the underlying benchmark for the Xtrackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR) and the VanEck Vectors ChinaAMC CSI 300 ETF (NYSEArca: PEK), has also performed well over the past five years. This index is comprised of A-shares with a higher weight toward tech names as well.
“China is a rollercoaster ride and impossible to time,” Shaun Port, chief investment officer at Nutmeg, told FT. “The determining factor of which index has done best has been which have the greatest exposure to technology stocks [which have rallied strongly in recent years].”
For more information on the Chinese markets, visit our China category.