A major provider of exchange-traded funds says to be cautious when trading in China.
Asian markets rallied on Thursday after a week of massive sales driven by debt problems at Evergrande, one of China’s largest real estate developers.
Evergrande’s problems shouldn’t make China a contactless zone for investors, said Arne Noeck of DWS Group, one of the minds behind the Xtracers Harvest CSI 300 China A-Shares (ASHR) ETF.
“China is very investable. However, we certainly caution that China should not be seen as a market like the United States or, say, most of Western Europe, ”said the head of systematic investment solutions at the company for the United States. ETF Edge told CNBC on Monday.
“China as an economy is clearly subject to much stricter and more stringent regulation. Regulatory risk on individual sectors and individual businesses has increased dramatically, ”Noeck said.
As such, investors should be careful to understand how their China-based ETFs are positioned in their market, he said.
The Chinese stock market has three main components: the mainland, Hong Kong, and Chinese companies listed in the United States.
ASHR, Noack’s ETF, owns mainland China’s 300 largest stocks, leaning heavily towards finance, information technology and consumer staples, and away from energy, communications and real estate.
But the exposure varies across the ETF space:
In addition, large international funds have different allocations for the Chinese market:
“China is most definitely too big and too big for the world economy to ignore,” Noeck said. “However, the current circumstances justify and show us that now is the right time to examine what drives China and what drives China’s various allocations … already existing through various other vehicles. Est.”
These discrepancies highlight why proactive management is so useful in China, Daniel Wiener, president of Advisory Investment Management, said in the same interview, adding that he was “happy to have been exposed” to his market. .
Weiner said, “An active manager can choose and build a portfolio based on their research, regardless of who creates these various indices. That is why we always recommend our clients to use active funds. Recommend to use. Also editor of a monthly newsletter, The Independent Advisor for Vanguard Investors.
“If you want to place a weighted bet on a country, be it China, France, Italy – Turkey was very popular last year – you can do that with ETFs, but you have to be very careful” , did he declare. “It really is a business vehicle. It is not an investment.