Why You Should Incorporate China ETF Exposure

Related: As Trade Tensions Linger, China ETFs Remain Hot

David Garff, President of Accuvest Global Advisors, pointed out that China is among Accuvest’s top ranked markets as this Asian economy ranks first among fundamental factors and momentum factors – China exhibited attractive long term earnings growth, percent change in PMI, return on equity, growth to price-earnings ration and mid-term returns. However, Garff warned that China was ranked less favorably due to greater risk exposure – the market showed less satisfactory current P/E versus 5-year average, high political risk, elevated price-to-cash earnings and percent expected change in foreign exchange moves.

Potential investors who are interested in taking a direct look into China’s market have a number of options available. Sean Edkins, Director and Head of ETF Sales and Strategic Partnerships for DWS Asset Management, outlined several options at DWS, including the Xtrackers MSCI All China Equity ETF (NYSEArca: CN), Xtrackers CSI 300 China A-Shares ETF (NYSEArca: ASHR), Xtrackers CSI 500 China A-Shares Small Cap ETF (NYSEArca: ASHS) and Xtrackers CSI 300 China A-Shares Hedged Equity ETF (NYSEArca: ASHX).

ASHR is the largest U.S-listed A-shares ETF and targets the 300 largest and most liquid stocks in the China A-shares market.

ASHS tracks more mid-sized Chinese A-shares, includiing Chinese A-shares taken from the China Securities 500 Index, stocks listed in Shanghai and Shenzhen.

CN has a broader portfolio, allowing investors to track mainland Chinese stocks, with a 33.8% position in ASHR and 5.4% in ASHS, and the fund holds Chinese stocks listed in the U.S. and Hong Kong.

Lastly, ASHX tracks the CSI 300 USD Hedged Index, which is designed to provide direct access to China A-shares while diminishing the negative effects of a depreciating Chinese yuan currency against the U.S. dollar – a weaker foreign currency means that returns are also lowered when converted into U.S.-dollar-denominated returns. The ETF basically acts like a hedged version of ASHR.

Financial advisors who are interested in learning more about China’s markets can watch the webcast here on demand.