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It’s been quite some time since the China A-shares market has opened its doors to global investors.  The mushrooming China A-Shares market, which was blocked to many foreign investors, saw a mad rush by issuers once the embargo was lifted. Several new funds have been launched in this space in the recent past with CSOP FTSE China A50 ETF (AFTY) being the latest to ride out the A-shares investing spree (read: Overlooked ETF Winners of China A-Shares Rally).

CSOP Asset Management has introduced this ETF to the market. Remarkably, this is the first ETF that has been listed in the U.S. solely by a Chinese asset management company and not with the help of any American asset manager. Let’s delve a little deeper.

AFTY in Focus

This new ETF, which will charge investors 99 basis points a year in fees, gives yet another chance to target the in-vogue China A-Shares market. AFTY will invest primarily in the FTSE China A50 Net Total Return Index for exposure. The index tracks 50 largest mainland China stocks. The fund is heavy on the financial sector (68.65%). As far as individual holdings are concerned, the index has moderate concentration risks (read: China A-Shares ETFs Explained).

Ping An Insurance (Group) Company Of China (9.04%), Citic Securities (6.08%) and China Merchants Bank (5.76%) are the top three holdings of the fund. The top ten holdings form as much as 47.89% of total fund assets resulting in considerable company specific concentration risks.

How Could it Fit in a Portfolio?

This ETF could be appropriate for investors seeking a new way to play the high-flying stock markets of the world’s second largest economy. Per the press release, the Chinese equity market was one of the best performing bourses last year. The underlying index returned about 68.8% in 2014 with a dividend yield of 2.42%. The turnover of the A-Share market touched a historic high last year.

Per the issuer, the segment has many other reasons to celebrate. The current Renminbi (RMB) internationalization, the recent monetary easing and interest rate cuts by the People's Bank of China (PBoC) twice in just four months will allure foreign investors to participate in the Chinese capital market (read: Policy Easing Puts China ETFs in Focus).

Moreover, the launch of the Shanghai-Hong Kong Stock Connect program, which allows direct trading of Shanghai shares by investors outside mainland China for the first time, has boosted the appeal for China-A shares in recent times. This, along with policy easing, shored up the mainland China stocks which appear less ruffled by external shocks.  

ETF Competition

At present, there are quite a large number of ETFs in the Chinese A-shares market that can be accessed by global investors. Apart from these, China large cap ETFs can also give tough competition to the new entrant.

Among the A-Shares peers, db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR), Market Vectors China ETF (PEK), KraneShares Bosera MSCI China A ETF (KBA) and PowerShares China A-Share Portfolio (CHNA) are worth mentioning. Among these, ASHR is the largest in size with about $1 billion in assets.  

If we keep this A-Shares pack aside, we will find a few more large-cap ETFs including iShares FTSE China 25 Index Fund (FXI), iShares MSCI China Index Fund (MCHI) and SPDR S&P China ETF (GXC). Investors should note that FXI is the largest Chinese equities ETF.

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DEUTS-XT HV CS3 (ASHR): ETF Research Reports
 
MKT VEC-CHINA (PEK): ETF Research Reports
 
KRANS-BOS CHINA (KBA): ETF Research Reports
 
PWRSH-CHA A-S P (CHNA): ETF Research Reports
 
ISHARS-CHINA LC (FXI): ETF Research Reports
 
ISHARS-MS CH IF (MCHI): ETF Research Reports
 
SPDR-SP CHINA (GXC): ETF Research Reports
 
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