Investors Flee China ETFs At Highs

Investors are taking profits on their China A-shares ETF investments. For the week ended March 25, China A-shares ETFs saw an outflow of $2.37 billion, the largest outflow since December 2014. It does not come as a surprise, as the A-shares ETFs have performed quite well over a short period of time and the powerhouse Chinese economy is finally starting to wind down.

Overview

The Deutsche X-Trackers Harvest CSI 300 China A-Shares ETF ASHR is up 10 percent year to date, while the Market Vectors China ETF (Market Vectors ETF Trust) PEK has gained 12 percent and the KraneShares Bosera MSCI China A Share ETF (KraneShares Trust) KBA has gained 12 percent in 2015. The A-shares have greatly outperformed their Chinese ETF peers, with the iShares FTSE/Xinhua China 25 Index (ETF) FXI only up 4 percent this year.

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Another reason for the outflow could be the high valuations of the A-share listed stocks that have become expensive relative to Hong Kong-listed Chinese stocks. The Shanghai A-shares are trading at 13.3 times forward earnings, while the MSCI China is trading at just 10 times.

Highlighted below are the three Chinese A-shares ETFs on the market.

Deutsche X-Trackers Harvest CSI 300 China A-Shares ETF

ASHR is made up of 306 of the largest companies in the China A-shares market, an area historically only available to citizens of Mainland China. The holdings are distributed across nine sectors, with financials at 38 percent and industrials at 16 percent being the most heavily weighted sectors.

The top individual holdings include:

• Ping An Insurance Group Co (PING AN INS CO ADR) PNGAY at 4.3 percent
• China Minsheng Banking Corp Ltd CMAKY making up 2.7 percent
• CITIC SECURITIES CIIHF coming in at 2.7 percent as well

ASHR is up 86 percent over the last 12 months and 60 percent over the last six months. This niche ETF has an expense ratio of 0.80 percent.

Market Vectors ETF Trust

PEK follows 301 A-share stocks that are distributed across 12 sectors. Financials at 40 percent and industrials at 15 percent are the largest sectors.

The top individual holdings include:

• Ping An Insurance Group at 4.1 percent
• China Minsheng Banking, making up 2.8 percent
• China Merchants Bank Co Ltd CIHKY, coming in at 2.7 percent

PEK is up 89 percent over the last 12 months and up 60 percent over the last six months. The ETF has an expense ratio of 0.72 percent.

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KraneShares Trust

KBA provides exposure to 316 Chinese A-shares companies traded on the Shanghai and Shenzhen stock exchanges. The ETF is distributed across nine sectors, with financials at 38 percent and industrials at 19 percent.

The top individual holdings include:

• Ping An Insurance Group, with a 2 percent holding
• Industrial & Coml Bank of China Ltd(ADR) IDCBY making up 1.8 percent
• CITIC SECURITIES, coming in at 1.7 percent

The A-shares ETF is up 79 percent over the last 12 months and up 55 percent over the last six months.