New China ETF Unveils Unique Emerging Market Opportunity

Deutsche Asset & Wealth Management just released their latest exchange-traded fund, designed to give investors a broad-based representation of China equities.

The db X-trackers Harvest MSCI All China Equity Fund CN began trading on Wednesday, and is designed to track a representation of large and mid-cap China securities that include coveted A-shares, H-shares, B-shares, and Red chips. In addition, this fund will feature traditional ADRs that are listed on domestic and foreign exchanges.

The total number of securities that CN tracks is 612, and the fund charges a net expense ratio of 0.71 percent.  This ETF is unique: it is the first domestically available product to have a truly broad and diversified representation of China and Hong Kong securities.

Related: Municipal Bond And Emerging Market ETFs Lead Fixed-Income Peers

China A-shares, in particular, were nearly impossible for U.S. retail investors to purchase prior to the release last year of the db X-trackers Harvest CSI 300 China A-Shares Fund ASHR. Typically, these shares are only available for purchase by mainland Chinese citizens -- and foreign investment is tightly regulated. 

ASHR provides direct access to 300 underlying China A-shares, which are primarily dominated by financial and industrial companies.    

Most ETF investors are familiar with the iShares China Large-Cap ETF FXI, which tracks a narrow focus of 25 liquid securities that trade on the Hong Kong exchange.  This fund has long been viewed as the “Dow Jones Industrial Average” of China. 

However, with increasingly open access to foreign markets and ETF providers paving the way for new capital, CN is unique positioned to capitalize on the next bullish cycle in Asia.  This new ETF is effectively situated to implement a combination of FXI and ASHR holdings within a single investment vehicle. 

CN certainly bears watching, as it gathers additional assets and momentum moving forward.  Based on the success of ASHR gathering $140 million in total assets over the last six months, there is clearly demand for innovative access to the China stock market.