Signs of a Return to an A-Shares ETF

Markets ETF Trends

Although emerging markets stocks and exchange traded funds are rebounding this year, for a good part of 2016, China has been a drag on that theme. That has changed for the better in recent weeks. Just look at the Deutsche X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR).

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ASHR, the largest US-listed ETF tracking stocks trading on mainland China, also known as A-shares, is up nearly 6% over the past 90 days. With the Hong Kong Securities and Futures Commission and the China Securities Regulatory Commission approving the much anticipated Shenzhen-Hong Kong Stock Connect program, China is opening up its capital markets and could ultimately benefit investors seeking exposure to Chinese markets through A-shares-related exchange traded funds.

SEE MORE: China A-Shares ETFs Climb on Anticipated Shenzhen-Link

Earlier this year, China ETFs retreated after index provider MSCI said it is again delaying the inclusion of China A-shares, the stocks trading in Shanghai and Shenzhen, in its widely followed emerging markets indexes.

Chinese A-Shares are a specific class of equity securities issued by Chinese companies and denominated in RMB. Under current Chinese regulations, foreign investors may access A-Shares if they are a designated foreign institutional investor or gained access through either the Qualified Foreign Institutional Investor (QFII) or a Renminbi Qualified Foreign Institutional Investor (RQFII) programs.

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ASHR’s recent strength is prompting bears to run for cover while bullish traders reconsider the fund.

ASHR “is growing bigger as short interest recedes after faster-than-expected growth eased concern about a hard landing in the world’s second-largest economy. About 1.4 percent of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF was sold short as of Sept. 9, down from almost 4 percent in mid-July before data showed second-quarter gross domestic product expanded 6.7 percent. Investors have added $77.2 million to the fund in the past four weeks,” according to Bloomberg.

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As mainland investment assets flow into Hong Kong exhanges, the premium on mainland A-shares over Hong Kong H-shares could continue to decline, potentially bolstering returns in the H-shares market.

For more information on China, visit our China category.

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

This article was provided by our partners at ETFTrends.