NEW YORK, April 11 U.S. investors could benefit from China's decision to allow cross-market investing between Shanghai and Hong Kong by buying exchange-traded funds that access China's mainland A-shares market, Credit Suisse analysts said in a note on Friday.
The ability of investors to buy stocks from either exchange more freely may narrow the valuation gap between so-called A-shares, traded in Shanghai, and so-called H-shares, traded in Hong Kong, the analysts note, thus allowing investors to profit from the spread tightening.
A-shares, which have historically traded at a large premium to H-shares, have recently traded at over a 5 percent discount to H-shares, they say, and the move by Chinese regulators to allow freer cross-border trading "could be the catalyst that brings the share classes back in line - as evidenced by the spread tightening by 1.7 percent after the announcement." Thus, investors may profit from getting long exposure to A-shares.
ETFs such as Deutsche Asset and Wealth Management's db X-trackers Harvest CSI 300 China A-Shares Fund, Van Eck Global's Market Vectors ChinaAMC A-Share ETF, and KraneShares' Bosera MSCI China A Share ETF all allow direct access to China's mainland A-shares market.
Investors can expect more A-shares ETFs in the future from those three providers, according to company filings with the U.S. Securities and Exchange Commission that show the ETF issuers have plans to launch more such funds. China A-shares ETFs on the horizon include some focusing on more specific sectors such as consumer staples and consumer discretionary products, as well as small-cap stocks, which analysts expect to do well in the long term. (Reporting by Ashley Lau in New York; Editing by Jonathan Oatis)