How to Prepare for MSCI’s China Change
This article was originally published on ETFTrends.com.
China is the second largest economy in the world, yet many do not have direct exposure to China’s mainland market or the Chinese A-shares.
On the upcoming webcast, How to Prepare for MSCI's China Change, Eric Legunn, ETF Strategist for DWS Asset Management, Todd Rosenbluth, Director of ETF & Mutual Fund Research for CFRA, and Sean Edkins, Director and Head of ETF Sales and Strategic Partnerships for DWS Asset Management, will outline best practices for diversified portfolio construction and look to investment options to help shore up a portfolio that is underweight in China.
For example, the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) is the largest exchange traded fund dedicated to China A-shares.
A-shares are the Chinese stocks trading on mainland exchanges in Shanghai and Shenzhen. In June, MSCI Inc. said it will include China A shares in the MSCI Emerging Markets Index and the MSCI ACWI Index beginning in June 2018.
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That announcement has broad support from international institutional investors with whom MSCI consulted, primarily as a result of the positive impact on the accessibility of the China A market of both the Stock Connect program and the loosening by the local Chinese stock exchanges of pre-approval requirements that can restrict the creation of index-linked investment vehicles globally.
While many of the popular emerging market funds include China exposure as one of their top country holdings, most funds access Chinese companies through H-shares or Hong Kong-listed stocks or N-Shares that are traded on the New York Stock Exchange. However, despite sharing a country of origin, the share class does not move in lockstep with Chinese domestic markets.
Fueling the divergence in correlation between the various share classes, H-shares have a heavy tilt toward the financial sector as most Chinese banks and insurance companies tend to list on the Hong Kong Exchange to access international capital.
Meanwhile, the share class that represents the largest portion of the Chinese economy is the A-shares class, which comprises over two thirds of the total Chinese equity market.
Financial advisors who are interested in learning more about China's markets can register for the Thursday, April 19 webcast here.
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