More exchange traded fund investors have turned to the Chinese A-shares market this year, riding the ups and downs of the emerging market, but they are also exposed to currency risks, especially as Beijing seeks to loosen control over the foreign exchange market.
Nevertheless, ETF investors interested in China’s A-shares domestic market but wary of a depreciating yuan currency can look at two currency-hedged China A-shares ETFs that came to market Tuesday.
“With ASHX we aim to capture the growth of one of the world’s fastest-growing economies, while minimizing exposure to currency volatility,” Fiona Bassett, Head of Passive in the Americas, said in the press release.
Specifically, 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 CSI 300 Index covers the 300 largest A-shares on mainland Shanghai and Shenzhen exchanges.
ASHX basically acts like a currency-hedged version of the popular Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) , which has $564.1 million in assets under management.
Sector allocations include a heavy tilt toward financials 38.5%, along with industrials 18.1%, consumer discretionary 10.6%, information technology 6.9%, materials 6.7%, consumer staples 5.6%, health care 4.3%, utilities 4.5%, energy 2.9% and telecom services 0.9%.
Current holdings include a full ASHR position, along with short CNH currency contracts.
CHNX tries to reflect the performance of the MSCI China A International with CNH 100% Hedged to USD Index, which includes Chinese A-shares listed on both the Shanghai Stock Exchange and Shenzhen Stock Exchange while also mitigating exposure to fluctuations in the Chinese renminbi relative to the USD.
CSOP Asset Management also launched the smart-beta CSOP China CSI 300 A-H Dynamic ETF (HAHA) on Tuesday. The fund has a 0.75% expense ratio.
HAHA tries to reflect the performance of the CSI 300 Smart Index, which is basically the CSI 300 Index with a twist. Since some Chinese companies offer both A-shares and Hong Kong-listed H-shares, and A-shares may trade at a premium to the H-shares counterpart, the underlying Smart Index will switch between H-shares and A-shares depending on which is most undervalued.
“After launching our first FTSE China A50 ETF in the U.S. market, we are proud to bring two more exciting products to U.S. investors,” Ding Chen, CSOP’s Chief Executive Officer, said in the press release. “With the expedited opening steps of China’s capital market, we maintain a constructive view on China’s A-shares market and think it is good timing for U.S. investors to increase their holdings of China A-shares.”
For more information on new fund products, visit our new ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.