China A-Share ETFs Dominate First Quarter Returns

With the first quarter of 2015 officially in the books, the results of the highest flying ETFs may surprise you. The first three months of the year saw tremendous interest in solar stocks, currency hedged funds, and even biotechnology companies. However, the prize for the swiftest gains goes to two unique ETFs focused on the China A-share market. The Market Vectors ChinaAMC SME-ChiNext ETF (CNXT) gained a whopping 48.56 percent since the beginning of the year. This relatively new fund debuted less than a year ago and already has amassed more than $44 million in total assets. (chart) CNXT tracks 100 of the largest and most liquid stocks trading on the Small and Medium Enterprise (SME) Board on the Shenzen Stock Exchange. What this means is that the makeup of CNXT is primarily small and mid-cap companies that range in size from $1 to $5 billion. The sector distribution within CNXT is weighted heavily toward information technology, industrials, and consumer discretionary names. These stocks have obviously been in high demand over the last three months as investors rush to take advantage of the strength in the coveted A-share market. The runner-up in terms of performance is the Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap ETF (ASHS). This ETF gained more than 37.35 percent so far in 2015 and is currently trading near its all-time highs. ASHS tracks 500 of the most widely traded small companies on the Shanghai and Shenzen exchanges. The fund has accumulated $43 million in assets and charges an expense ratio of 0.80 percent to access a high growth segment of the Chinese economy. The ability to access A-share stocks is still a relatively new concept for investors outside of mainland China. Prior to the opening of this market to foreign investment, ETF participants were primarily focused on the iShares China Large-Cap ETF (FXI) as a proxy for Chinese stocks. FXI still has the lion's share of the China ETF market with $6.15 billion in assets. Nevertheless, there are now 34 individual ETFs dedicated to some aspect of China stock allocation in both broad-based indexes and niche sectors.