Here I am being a poster boy for van eyke, but in lieu of AGF's performance, discount etc. issues, more choice could help. I offer no opinion on this, have done no analysis. Taken from Morningstar today.
If nothing else, the unpredictability of mainland China's A-shares market over the past few weeks has been attention-grabbing. From its peak in June 2015, Chinese A-shares have fallen 25 per cent, wiping an estimated US$4 trillion in value off the market.
More than half of the companies on China's mainland exchanges experienced trading halts and policy makers took unprecedented measures to prop up the market by banning large shareholders from selling, instructing state-run institutions to buy equities and allowing the central bank to finance stock purchases.
During this time, Van Eck Global launched the first pure China A-shares exchange-traded fund (ETF) on the Australian Securities Exchange (ASX), the
Market Vectors ChinaAMC A-Share ETF (CETF).
The ETF tracks the CSI 300 Index, which represents the largest and most liquid shares listed on mainland China's two stock exchanges, Shanghai and Shenzhen. The A-shares held by CETF are acquired and managed with assistance from China Asset Management Company (ChinaAMC), one of the leading asset managers in China.
We believe investors should not fixate on short-term market volatility, which is just that, market volatility. This is not necessarily activity related to underlying economic and structural fundamentals in China.
The fundamental investment case for China A-shares has not changed. Equities still play a small role in the mainland financial system. The China stock market represents only a third of GDP, compared with most developed economies where the value of the stock markets are greater than GDP.
China represents the second-largest equity market in the world after the US. A-shares are shares of companies incorporated in mainland China that are listed on the Shanghai or Shenzhen exchanges, and are based in renminbi. Many of China's most important companies can only be accessed through A-shares.
Historically, A-shares were only available to mainland Chinese investors. Starting in 2002 and increasingly in recent years, the Chinese government has opened up its capital markets to foreign institutional investors via foreign investment quotas. With the opening-up of the Chinese economy, A-shares will become an increasingly important destination for global investors.
China currently represents under 2 per cent of the MSCI World All Countries Index, despite accounting for 30 per cent of the world economy. We are certainly of the view that a discount must be factored into China holdings in respect of it having both a developing market and currency.
However, we see this as a significant gap between global markets and global economic reality, which we believe will inevitably become narrower as foreign institutional investors take up greater allocations of China A-shares.
