New China Small Cap ETF Offers Exposure To Coveted A-Shares

Investors looking for exposure to small cap stocks in China have a new tool to add to their arsenal.  Deutsche Asset and Wealth Management recently released their latest foray into the China market with the db X-trackers Harvest CSI 500 China-A Shares Small Cap Fund ASHS.

This ETF is the first of its kind to offer direct exposure to 500 China A-share small cap companies listed on the Shanghai and Shenzhen stock exchanges.  The fund uses a passive replication approach to track the China Securities 500 Index.

ASHS represents a unique opportunity to own Chinese equities that have previously only been available to mainland citizens under tight regulation.  The total expense ratio of ASHS is currently listed at 0.82 percent. 

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This new small cap offering will build off the success of the db X-trackers Harvest CSI 300 China A-Shares Fund ASHR, which was released late last year and has quickly accumulated nearly $150 million in assets under management.  ASHR tracks the 300 largest and most liquid stocks on the China A-share market. 

With the Chinese government relaxing restrictions on foreign investment in A-shares, both of these ETFs are well positioned to capitalize on high growth opportunities in the world’s second largest economy. 

In addition, they will compete with well-established China ETFs such as the iShares China Large-Cap ETF FXI and Guggenheim China Small Cap ETF HAO. 

Both of these funds have proven track records and invest in public Chinese companies that are easily accessible to foreign investors.  However, they don’t have any exposure to A-share stocks. 

While Chinese stocks have been trading down for most of the year, ASHS and ASHR may be positioned to make a strong comeback during the next bullish cycle.  Many emerging market countries are now showing excellent relative value versus their developed market peers and economic growth statistics continue to shine as well.