There's an ETF for that? The 3 Best ETFs for Investing in China's Comeback

iShares China Large-Cap ETF

FXI

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One popular ETF choice for gaining exposure to the Chinese market is FXI. It stands out due to the iShares brand recognition, substantial assets under management totaling $5.1 billion, and a notably low bid-ask spread of 0.04%.

FXI tracks the FTSE China 50 Index, which focuses on the 50 largest Chinese blue-chip companies by market capitalization, including major names like Tencent, Meituan, Alibaba, China Construction Bank, JD.com, and Xiaomi.

While FXI is an excellent tool for traders looking to capitalize on short-term movements, long-term investors might find its focus limited to large-cap stocks a downside. Additionally, the fund's relatively high expense ratio of 0.74% could be a deterrent for buy-and-hold investors.

KraneShares CSI China Internet ETF

KWEB

KWEB tracks the CSI Overseas China Internet Index, capturing leading Chinese internet companies that primarily operate in technology, consumer discretionary, or communications sectors.

It offers a slightly lower expense ratio of 0.69% compared to FXI, and is managed by KraneShares, a firm specializing in Chinese equities, adding a layer of expertise in this specific market segment.

Notable holdings include industry giants like Tencent, Alibaba, Meituan, and JD.com, but it distinctively excludes the typical banking, industrial, and energy stocks found in broader Chinese ETFs like FXI.

The focus on cyclical sectors makes KWEB a leveraged bet on China's economic prosperity, reflecting in its relatively high beta of 1.3.

This volatility, coupled with an options chain, provides opportunities for generating income through selling covered calls, thanks to the higher option premiums associated with the ETF's underlying assets.

But, if you want to outsource the covered call writing, KraneShares also offers the KraneShares China Internet & Covered Call Strategy ETF

, which currently sports a 41.8% distribution yield with monthly payouts.

Xtrackers Harvest CSI 300 China A-Shares ETF

ASHR

Chinese equities are classified into two main categories: H-Shares and A-Shares. This distinction influences not only where the stocks are traded but also their accessibility to international investors.

H-Shares are Chinese companies listed on the Hong Kong Stock Exchange and accessible to all types of investors, while A-Shares are listed on mainland China's Shanghai and Shenzhen exchanges and were historically restricted to domestic investors only.

For exposure to A-Shares, the ETF to watch is ASHR. It tracks the CSI 300 Index, which offers a broader representation of the Chinese market compared to the more narrowly focused FTSE China 50 Index tracked by FXI.

ASHR includes unique companies like Kweichow Moutai, a renowned alcoholic beverage manufacturer; China Yangtze Power Co Ltd, an infrastructure titan; and BYD Co. Ltd, a leader in electric vehicles.

Despite its access to the often-pricier A-Shares, ASHR maintains a competitive edge with the lowest expense ratio among the three discussed ETFs at 0.65%.

 

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.