Signs of a Return to an A-Shares ETF

MarketsETF 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).

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.

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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.

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.