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China A-Shares: Include Them In Your Portfolio Now

The Belgian Dentist profile picture
The Belgian Dentist


  • As from next month, Chinese A-shares will be included in the MSCI Emerging Markets Index.
  • The Chinese economy isn’t running too hot or too cold.
  • Chinese A-shares have currently a low correlation with developed and emerging markets.
  • The valuation of Chinese A-shares is cheap and momentum is positive.

The inclusion of China-A shares into the MSCI Emerging Markets Index will be a long-term process and hence a driving force for Chinese A-shares in the years to come. The valuation of A-shares is cheap, although they are more expensive than H-shares.

A-shares vs H-shares

The Chinese stock market is relatively young and started in 1990 with the establishment of two mainland exchanges: the Shanghai Stock Exchange and Shenzhen Stock Exchange. The main boards of the Shanghai and Shenzhen Stock Exchanges list larger and more mature stocks, like the NYSE in the US.

Stocks of Chinese companies traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange are called A-shares.

H-shares are listed on the Hong Kong Stock Exchange; they are available mainly to non-Chinese investors. But in both cases, the origin of business should be mainland China.

Historically, A-Shares were accessible only to domestic investors or foreign institutional investors through the Qualified Foreign Institutional Investor (QFII) system. But with the launch of the Shanghai-Hong Kong Stock Connect in November 2014 and the Shenzhen-Hong Kong Stock Connect in December 2016, that changed.

The Stock Connect allows foreigners to trade certain Chinese stocks listed on the Shanghai and Shenzhen exchanges and for Chinese investors to trade shares in Hong Kong. The program includes more than 2,000 China A-shares that can be traded by investors through the Hong Kong Exchange.

Now the restrictions on foreign investors are easing and investors willing to accept the risks associated with investing in China can access the growth-potential of one of the world's fastest-growing economies with Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEARCA:ASHR). This was the first exchange traded fund to offer U.S. investors direct access to the China A-shares universe. The ETF seeks investment results that correspond generally to the performance of the

This article was written by

The Belgian Dentist profile picture
A private investor

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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