Best China ETFs for 2024
China has long been a region of interest for investors. The country has been hailed as one of the fastest-growing economies in the world, making China ETFs an interesting candidate for inclusion in stock portfolios. Some industry pundits, however, have warned that investing in China comes with several downsides in addition to the upsides.
This article provides an overview of some of the best China ETFs to watch. The term ‘China ETF’ is also explained in more detail, and various pros and cons of investing in China ETFs are covered.
Table of Contents
Key Takeaways
- A China ETF is an Exchange-Traded Fund that invests primarily in Chinese stocks. By buying a China ETF, investors can, in one transaction, obtain a stake in a wider range of Chinese companies.
- China’s GDP rose by an average of 8.95% per year from 1989 to 2023 as the country’s economy has been rapidly developing.
- China has a large population of over 1.4 billion people, of which a growing portion is becoming middle-class and gaining disposable income.
- Investing in Chinese stocks can be difficult for foreigners, and there are demographic indicators that signal that the country’s economy might not continue growing at the same rapid pace as in previous decades.
What are China ETFs?
An Exchange-Traded Fund (ETF) can be thought of as a basket of stocks that can be traded with one single transaction. China ETFs are funds that have invested into a basket consisting mostly of stocks belonging to Chinese companies.
China imposes many restrictions on foreign investors, which can make buying single Chinese stocks difficult. Buying a China ETF can be a way for investors to avoid these difficulties, as the best China funds have all the proper registrations with the authorities.
Investors can also trade individual Chinese companies that list some of their shares on US stock exchanges through the American Depositary Receipt (ADR) system.
Best China ETFs to Watch
As always, it is important to mention that whatever constitutes the ‘best’ for a given investor is dependent on their personal situation and individual goals. Therefore, what constitutes the ‘best’ investment is subjective. This list is meant as a starting point for investors interested in doing more research on Chinese securities for their investment portfolio.
List of Best China ETFs to Watch:
- SPDR S&P China ETF – Top Companies in China Represented in the S&P China BMI Index
- iShares China Large-Cap ETF – BlackRock’s Fund Covering the 50 Largest Companies in China
- Xtrackers MSCI China TRN Index ETF – Broad Coverage of Free-Float Market-Capitalisation of Chinese Companies
SPDR S&P China ETF – Top Companies in China Represented in the S&P China BMI Index
The SPDR S&P China ETF is issued by State Street Global Advisors (SSGA) and aims to track the S&P China BMI Index. This index is market-capitalization weighted and represents the top companies by market capitalisation in China that are publicly traded and available for investment by foreign investors. Roughly 96% of the capital in this fund is allocated to companies headquartered in China. The other four per cent goes to companies from Hong Kong (~3.6%), and Singapore (~0.2%).
The top ten holdings of the fund by size of capital allocation are Tencent Holdings (~10.6%), Alibaba Group (~7.5%), Meituan Class B (~3.3%), PDD Holdings (~2.4%), China Construction Bank (~2.2%), Hong Kong Dollars (the currency), Baidu class A (~1.7%), Netease (~1,6), Ping An Insurance Group (~1,6). In total, there are 945 companies included in this ETF, and roughly 20% of the fund’s capital goes to the top three holdings.
The capital in this fund is allocated chiefly to the economic sectors of Discretionary Consumer Goods (~27%), Communication Services (~17%), and Financials (~15%). The rest of the fund’s capital is spread in smaller amounts over a number of other sectors, including Industrial and Information Technology.
The fund trades under the ticker symbol ‘GXC’ on the New York Stock Exchange. With Admirals, you can trade the SPDR S&P China ETF CFD (contracts for difference) which allows you to trade long and short.
iShares China Large-Cap ETF – BlackRock’s Fund Covering the 50 Largest Companies in China
The iShares China Large-Cap ETF is issued by BlackRock, the largest asset manager in the world, with roughly $9 trillion in assets under management. The fund aims to track an index of the 50 largest companies by market capitalization on the Hong Kong Stock Exchange. The fund therefore only contains companies with large market capitalizations and is less suited for investors looking to invest in Chinese companies with medium and small market capitalizations.
The top ten holdings of this fund by size of capital allocation are Alibaba Group (~10%), Meituan (~9.4), Tencent Holdings (~9%), China Construction Bank (~5.4%), Baidu class A (~4.4%), Netease (~4.3%), JD.COM class A (~4.2%), Ping An Insurance Group (~4%), Industrial and Commercial Bank of China (3.9%), and BYD (~3.6%).
The top sectors represented in this fund are Luxury Consumer Goods (~35%), Financials (~25%), and Communication Services (~20%). The rest of the fund’s capital is spread in smaller amounts over a number of other sectors, including Energy and Consumer Staple Goods.
The fund trades under the ticker symbol ‘FXC’ on the Borsa Italiana, Euronext Amsterdam, London Stock Exchange, Deutsche Boerse Xetra and the Bolsa Mexicana De Valores. With Admirals, you can trade the iShares China Large-Cap ETF CFD which allows you to trade long and short.
Xtrackers MSCI China TRN Index ETF – Broad Coverage of Free-Float Market-Capitalisation of Chinese Companies
The Xtrackers MSCI China TRN Index ETF aims to track the MSCI China TRN Index, which reflects the performance of the following market: large and medium capitalization Chinese companies across A, H, and B shares, Red Chips, P Chips, and foreign listings. In doing so, the index covers roughly 85% of the free-float market capitalization of all publicly traded Chinese companies. The index is weighted by free-float adjusted market capitalization. ‘Free Float’ refers to the shares that are available for trading on the open market and excludes, for example, the shares held by a company’s directors and founders.
The top ten holdings by the size of capital allocation in this fund are Tencent Holdings (~13.4%), Alibaba Group (~8.8%), Meituan (~4%), China Construction Bank (~3%), Ping An Insurance Group (~2%), JD.COM class A (~2%), Baidu class A (~2%), Netease (~2%), Pinduoduo ADR Representing (~1.8%), and Bank of China (~1.6%). Roughly 90% of the fund’s capital is allocated to companies headquartered in China.
The main economic sectors represented in this fund are Communication Services (~20%), Financials (~16%), unknown (16%), and Consumer Discretionary Goods (~16%). The rest of the fund’s capital is spread in smaller amounts over a number of other sectors, including Information Technology and Consumer Staples. ‘Unknown’ is the label given to companies whose operations have not yet been identified as chiefly belonging to a given economic sector.
The fund trades under the ticker symbol ‘XCS6’ on the Stuttgart Stock Exchange, the Borsa Italiana, the London Stock Exchange, and XETRA. It also trades under ‘XMCH’ on the Swiss Stock Exchange.
How to Invest in China ETFs
With Admirals, you can invest in global stocks and ETFs with the following commissions:
- UK stocks and ETFs – 0.1% of trade value, 1 GBP minimum commission.
- US stocks and ETFs – From $0.02 per share, 1 USD minimum commission.
- Germany and France stocks and ETFs - 0.1% of trade value, 1 EUR minimum commission
You can learn more about investing commissions on the Admirals Contract Specification page. You can search for global stocks and ETFs from the Invest.MT5 web platform and invest in four steps:
- Open an account with Admirals.
- Click on Trade on one of your live or demo trading accounts to open the web platform.
- Search for your symbol at the top of the search window.
- Click Create New Order in the bottom window to open a trading ticket to input your trade size, stop loss and take profit level.
Conclusion: Pros & Cons of Investing in China ETFs
Here are some pros and cons of investing in China ETFs.
Advantages of China ETFs
Investors might choose to invest in China because it is hugely populated, and its citizens are increasingly becoming middle-class. This means more disposable income and a larger potential consumer base for companies to sell to.
Furthermore, China has been pouring a lot of money, namely 2.5% of its GDP, into research and development with the intent of improving the country’s competitiveness within the information technology sector. This is important, as the world is increasingly becoming digital.
Downsides of Investing in China ETFs
In terms of downsides, China’s population is ageing rapidly thanks to its infamous one-child policy. This means the country might run short of labour power in the future, which can lead to a decline in the pace of economic growth.
Furthermore, much of the country’s economic growth was due to its low manufacturing costs. As these costs have steadily been rising, foreign companies have been leaving China and turning to other Asian economies for cheap labour. The question remains whether China can transition into a mainly services-based economy and remain competitive on the world stage.
There is also a political element to consider with US-China trade war rhetoric resuming. China can be very quick in changing its government policy and rules for companies which is why it is considered to be a more volatile region to invest in.
Continue Reading:
- Trading the Chinese Financial Market
- Investing in the Chinese Stock Market
- Investing in China's Shanghai Index
- How to Trade Asia Markets
- What are ETFs? ETFs Explained
- How to Trade ETFs with €1,000
- The CFD Trading Guide
FAQs on Best China ETFs
Which Chinese ETF is the best?
There is no single ‘best’ China ETF, as every China ETF comes with its own pros and cons. The iShares China Large-Cap ETF, for example, tracks only companies with market capitalisations above a certain threshold and is therefore less suited to investors who want to invest their money in a broader range of Chinese securities. Investors would do well to properly research the ETFs they end up buying into.
What is the biggest Chinese ETF?
The largest China ETF is the iShares MSCI China ETF, which has around $7.6 billion in assets. The China ETFs listed in this article have assets under management ranging from $600 million to $1.8 billion.
What is the best way to invest in China?
Investors can purchase a China ETF that is listed on a Western stock exchange, like the London Stock Exchange, as this avoids dealing with the country’s restrictions on foreign investors. When it comes to selecting the specific China ETF that is most suited to a given portfolio, there are other factors to consider, like risk appetite, economic sector preference, and the denomination of the exchange listing, to name a few.
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