Many investors have begun looking towards China to take part in their expected economic recovery assuming they avoid a second wave of COVID-19. Here are three ASX ETFs that provide exposure to China.
VanEck Vectors FTSE China A50 ETF
The VanEck Vectors FTSE China A50 ETF (ASX: CETF) provides exposure to the 50 largest listed companies in mainland China. What you can expect from these 50 companies is a large exposure to financials (about 45% of the portfolio) and consumer staples (around 20%). CETF is the cheapest of the three ETFs on this list, with a management fee of 0.6% per year.
In terms of performance, CETF has struggled, returning 3.09% per year since inception in 2010. Although the fund has operated for a number of years, it was only listed as an ETF in October last year. Over the last 12 months, CETF is up around 1.5% despite the drops experienced over the last few months. However, looking more closely at the returns, it becomes clear that the positive returns are largely supported by the annual dividend, while capital growth has been flat or negative.
More info can be found in our CETF report.
iShares China Large-Cap ETF
The iShares China Large-Cap ETF (ASX: IZZ) is very similar to CETF, offering access to the 50 largest listed companies in mainland China. While IZZ charges a higher management fee of 0.74%, it has also shown stronger performance than CETF, up 4.74% per year over the last 10 years and 3.34% over the last 12 months.
While these two ETFs both track the FTSE China A50 Index, performance differs as a result of the fact that CETF was, until April 2020, tracking the CSI 300 Index. So, if you’re considering one of these ETFs than IZZ may seem more attractive for its past performance but going forward it is likely that IZZ and CETF will have very similar returns, and CETF still currently offers lower management fees.
You can read more about IZZ here.
VanEck Vectors China New Economy ETF
The third ETF on this list, the VanEck Vectors China New Economy ETF (ASX: CNEW) has a very different risk-reward profile than the first two. CNEW provides exposure to Chinese companies in the ‘new economy’, which in this case refers to technology, healthcare, consumer staples and consumer discretionary companies.
While CETF and IZZ both have very high exposure to financials, CNEW’s biggest sectors are food, beverage and tobacco, pharmaceuticals, healthcare, and technology, and in total CNEW has 120 holdings. The result of this different focus is a return of 30.37% over the last 12 months.
This return seems to justify the higher management fee of 0.95% each year but note that this is still towards the high-end of ETF management fees.
These three options each have their merits and CETF and IZZ could certainly be considered the ‘safer’ options. CNEW has shown great returns over the last 12 months but the fund still has a short track record and is yet to really reach scale with net assets of $71.5 million. While I wouldn’t rush into buying CNEW shares, I do believe it’s a fund worth keeping an eye on as China’s economy bounces back.
Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.