China A-Shares ETFs On Volatile Ride

Mainland Chinese stocks are quickly becoming an enticing alternative to Hong Kong-listed stocks. As China continues to open its doors to international investors, the ability to invest in some of the country's fastest-growing companies is now available.

The Shanghai Composite is up 40 percent since the end of June, and has quickly become a favorable alternative to Hong Kong-listed stocks for many investors. In July, China’s A-shares were trading at an 11 percent discount in comparison to the Hong Kong-listed H-shares.

After the most recent rally by the Shanghai Index, China’s A-shares are trading at a 12 percent premium to their Hong Kong-listed counterparts.

Many investors are scratching their heads trying to determine what factors are influencing this appetite for Chinese stocks. Factory activity, the real estate sector and the overall growth of the economy have begun to slow in recent months.

Related Link: How These 4 Tech Giants Are Resolving Their China Challenges

It could be possible that the recent dramatic rally burst its bubble this week as the Shanghai Index fell by 5 percent on Tuesday. The action the last few weeks of the year will be extremely important for Chinese stocks as investors debate the bursting of a bubble or a short-term selling situation that will lead to higher prices in 2015.

Highlighted below are two China A-share ETFs that have benefitted from the increased interest in investing in mainland China.

Deutsche X-Trackers Harvest CSI 300

The Deutsche X-tracker Harvest CSI 300 China A-Shares ETF ASHR is made up of 304 of the largest companies on China’s A-share market, an area historically only available to citizens of Mainland China. The holdings are distributed across nine sectors, with financials at 47 percent and industrials at 14 percent being the most weighted sectors.

The top individual holdings include:

• Ping An Insurance Group Co of China at 4.2 percent holding
• China Minsheng Banking Corp Ltd at 3.4 percent
• China Merchants Bank Co Ltd making up 3.1 percent

ASHR is up 30 percent year-to-date and 46 percent over the last six months. This niche ETF has an expense ratio of 0.82 percent.

Market Vectors ETF Trust

TheMarket Vectors ETF Trust PEK follows 302 A-share stocks that are distributed across 11 sectors. Financials at 39 percent and industrials at 14 percent are the most heavily weighted sectors.

The top individual holdings are identical to ASHR with a slightly different weighting. PEK is up 26 percent year-to-date and up 45 percent over the last six months. It has an expense ratio of 0.72 percent.

Mainland China still remains a mystery to many investors and is it important to note that while more mainland Chinese companies are becoming available to investors everyday, they are not held to the same legal standards or regulated as closely to companies listed in the United States.