Hard to Ignore China A-Shares

ETF Trends

Most investors that access Chinese equities via exchange traded funds are accustomed to doing so with ETFs heavy on Hong Kong or U.S.-listed shares.

That is changing as China’s A-shares, the stocks traded in Shanghai and Shenzhen, become a large part of the Chinese investment conversation and more ETFs grant access to previously hard-to-reach A-shares.

“More than 2,500 companies are listed on the Shanghai and Shenzhen exchanges for a combined market capitalization of $4 trillion, the fifth largest globally, with their combined average monthly trading volume at around $632 billion, third globally behind NYSE and Nasdaq,” CNBC reports, citing HSBC.

The bank expects foreign investors’ participation in A-shares could more than triple to 10% in 2020 from just 3%, CNBC reported.

That could be a boon for ETFs such as the db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR), Market Vectors China ETF (PEK) and the newly minted KraneShares Bosera MSCI China A ETF (KBA). The PowerShares China A-Share Portfolio (CHNA) also offers A-shares, but via derivatives whereas the aforementioned ETFs have obtained Renminbi Qualified Foreign Institutional Investor (RQFII), allowing the funds to directly own A-shares. [A-Shares ETFs Allow Increased Access to China]

Index providers are also taking notice of the increased importance and accessibility of China’s A-shares markets. Earlier this month, MSCI (MSCI) said earlier this week it is in the consulting stages on the potential inclusion of Chinese A-shares equities in the MSCI Emerging Markets Index.

MSCI expects to make a decision on including A-shares in the MSCI Emerging Markets Index, to which $1.3 trillion in global assets are benchmarked, when it announces its annual market classification in June. If MSCI decides to elevate A-shares. [Index Promotion Could Lift A-Shares ETFs]

Although Chinese stocks have struggled this year, some investors have found increased access to A-shares too tempting to ignore. PEK, the first U.S.-listed ETF to grant investors to A-shares via a basket of derivatives, has seen its assets under management total surge on a percentage basis since converting to physical holdings in early January. [Market Vectors China ETF Goes to Physical A-Shares ETFs]

ASHR, the first ETF listed in the U.S. to offer investors direct exposure to A-shares, has over $151 million in assets after debuting in November. KBA has $11.6 million in assets after just two weeks on the market.

db X-trackers Harvest CSI 300 China A-Shares Fund

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