As its economy gets back on track following the coronavirus pandemic, China exchange-traded funds (ETFs) could be a value play after the second-largest economy declined during the first quarter for the first time in the last 30 years.
Morningstar reported that between March and May, investors exited the doors of China ETFs to the tune of $2 billion in outflows. Nonetheless, many market analysts remained optimistic about the nation’s bounce-back.
“Investors can get cheap, diversified exposure to Chinese stocks, but those options have not performed nearly as well as using more targeted ETFs,” a Barrons article noted.
“They are a massive economy; they’re influencing so much what’s happening in the world,” says Ed Lopez, head of ETF products for VanEck. “It’s a market you just can’t ignore.”
One fund to consider is the iShares MSCI China ETF (MCHI ), which seeks to track the investment results of the MSCI China Index. The index is a free float-adjusted market capitalization-weighted index designed to measure the performance of equity securities in the top 85% in market capitalization of the Chinese equity securities markets, as represented by the H-shares and B-shares markets.
Here are three other funds to consider as China continues its recovery:
- Xtrackers CSI 300 China A-Shares ETF (ASHR ): seeks investment results that correspond generally to the performance, before fees and expenses, of the CSI 300 Index. The fund will normally invest at least 80% of its total assets in securities of issuers that comprise the underlying index. The underlying index is designed to reflect the price fluctuation and performance of the China A-Share market and is composed of the 300 largest and most liquid stocks in the China A-Share market. The underlying index includes small-cap, mid-cap, and large-cap stocks.
- Xtrackers CSI 500 China A-Shares Small Cap ETF (ASHS ): seeks investment results that correspond generally to the performance, before fees and expenses, of the CSI 500 Index. The index is designed to reflect the price fluctuation and performance of small-cap companies in the China A-Share market and is composed of the 500 smallest and most liquid stocks in the China A-Share market. Under normal circumstances, the fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in A-Shares of Chinese small-cap issuers or in derivative instruments and other securities that provide investment exposure to A-Shares of Chinese small-cap issuers.
- Xtrackers MSCI China A Inclusion Equity ETF (ASHX ): The investment seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI China A Inclusion Index. The fund will normally invest at least 80% of its total assets in securities (including depositary receipts in respect of such securities) of issuers that comprise the underlying index. The underlying index is designed to track the equity market performance of China A-Shares that are accessible through the Shanghai-Hong Kong Stock Connect program or the Shenzhen-Hong Kong Stock Connect program.
