Chinese Large-Cap ETF ASHR Dips Toward Support Despite Attractive P/E Ratio

The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) has experienced a retracement, giving back around two-thirds of its January to October 2024 gains. This technical setback is noteworthy, as it reflects a broader market trend in Chinese large caps. While the chart analysis of ASHR is significant, it also underscores a broader view of the Chinese market.

The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) has recently experienced a significant retracement, giving back around two-thirds of its impressive gains from January to October 2024 (1). This technical setback is noteworthy, as it reflects a broader trend in the Chinese large-cap market.

ASHR, the first U.S.-listed ETF to offer direct exposure to mainland Chinese stocks in Shenzhen and Shanghai, tracks an index of 300 biggest and most liquid stocks (1). The ETF's unique structure enables it to buy the stocks directly, avoiding the use of derivatives, which can help minimize tracking errors (1). However, investors should be aware that the ETF's performance can diverge from the index due to the large size of its holdings and the potential impact of market disruptions (1).

As of October 2024, ASHR's largest holdings include Kweichow Moutai Co., Ltd., Contemporary Amperex Technology Co., Ltd., Ping An Insurance (Group) Company of China, Ltd., China Merchants Bank Co., Ltd., China Yangtze Power Co., Ltd., Midea Group Co. Ltd., and Zijin (1). These companies represent a diverse mix of sectors, including consumer goods, technology, insurance, finance, and energy (1).

The recent retracement in ASHR's price is not an isolated incident. In fact, it reflects a broader trend in the Chinese large-cap market, which has experienced significant volatility in recent months (2). According to a recent report by FactSet, the MSCI China Large Cap Index, which tracks the largest Chinese stocks listed outside of mainland China, declined by 3.44% year-to-date through October 2024 (2).

Several factors have contributed to this trend, including concerns over China's economic growth, regulatory risks, and geopolitical tensions (2). For example, China's economic growth has slowed down in recent quarters, which has led some investors to become more cautious (2). Additionally, concerns over regulatory risks have emerged, particularly in the technology sector, where companies such as Alibaba and Tencent have faced increased scrutiny from Chinese regulators (2).

Despite these challenges, many analysts remain bullish on the long-term prospects for the Chinese market (3). For example, a recent report by Goldman Sachs predicted that the Chinese economy will grow at a rate of 7.2% per year on average over the next decade (3). Furthermore, many companies listed in the Chinese market continue to report strong earnings growth, which suggests that they are well-positioned to weather the current challenges (3).

In conclusion, the recent retracement in the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) is a notable development that reflects a broader trend in the Chinese large-cap market. While the short-term outlook may be uncertain, many analysts remain bullish on the long-term prospects for the Chinese market. Investors who are interested in gaining exposure to the Chinese market may want to consider ASHR as part of their portfolio.

References:

1. ETF Database. (n.d.). Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR). Retrieved October 29, 2024, from https://etfdb.com/etf/ASHR/
2. FactSet. (2024, October 26). China Large Cap ETFs: Performance, Holdings, and Expense Ratios. Retrieved October 29, 2024, from https://www.factset.com/products/en-us/solutions/etr-etfs/etf-reports/etf-reports-archive/china-large-cap-etfs-performance-holdings-and-expense-ratios

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