Today, Emerging Market investors have a new tool in their
toolbox. Deutsche Asset & Wealth Management released
their latest emerging market ETF named db X-trackers Harvest MSCI
All China Equity Fund (
[caption id="attachment_59727" align="alignright" width="300"]
Shanghai skyline at night[/caption]
In the past, if emerging market investors wanted exposure to
China, it was done through iShares China Large-Cap ETF (
). The iShares China Large-Cap ETF only tracked 25 shares
traded on the Hong Kong exchange, providing a small snap shot of
the Chinese market.
When the FXI was created back in October 5, 2004, accesses to
foreign markets were limited. Fast forward to today and we see much
more open global markets compared to 2004.
This has allowed Deutsche Asset & Wealth Management to
create a more robust ETF representing China's economy on broader
and deeper scale.
If we dig into the FXI ETF, we find 25 high volume stocks traded
only on the Hong Kong exchange that are focused heavily in the
Because of the increased access to China's markets, we now have
an ETF that actually contains 146 stocks, according to the ETF's
site page, and exposure to db X-trackers Harvest CSI 300 China
A-Shares Fund (
) effectivly allows the ETF to track some 446 stocks and ADRs.
CN's Net Expense Ratio of 0.71% ratio is slightly better than
FXI Net Expense Ratio 0.73%, sweetening the deal.
What I like most about CN ETF is not only the broader deep mix
of stocks that actually trade on the China exchange, but the
controlled exposure to the ASHR ETF. AHSR is also a fairly
new ETF launched in November last year that is comprised of 300
China A-Shares. A-Shares can only be bought by Mainland
Chinese Citizens and, recently, by qualified foreign
investors through tightly controlled access points.
Both the CN and ASHR now provide emerging market investors
access to A-Shares and stocks traded directly on China's
BUT, and this is a BIG BUT, do not run out and sink your life
savings into the CN ETF. You will not see me in this ETF for
some time. I want to watch the performance of the ETF before
investing. I want to see significant volume from the big
players. During this time period we can watch the ETF's:
- Price Action
- How well it tracks the China's markets
- Overall Performance
- Bid/Ask Spread
- Will there options to hedge positions?
Remember, there have been several other ETFs that have
fallen short competing against the FXI ETF.
Just look at Market Vectors ChinaAMC A-Share ETF (PEK) launched
back in October 2010 as $50 ETF and now trades below $30 on a next
to nothing volume with a dime spread.