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Vanguard Gets Cozy with China A-Shares


Chinese stocks, particularly the stocks traded in Mainland China known as A-shares, have been on fire this year.

The Deutsche X-Trackers Harvest CSI 300 China A-Shares ETF (ASHR), which tracks an index of the 300 largest and most liquid Chinese shares traded on the Shanghai and Shenzhen exchanges, has soared nearly 45% year to date, and during the past 12 months it’s up 140%.


Now, that fire-breathing performance is likely to get even more fuel from mutual fund and ETF issuer Vanguard Group.

Vanguard just announced that its $69 billion emerging-market index fund will add A-shares, which is basically the first step in a rebalancing of emerging market indices. It’s also a step that will continue increasing A-shares’ representation in that index for years to come.


The Vanguard Emerging Market VIPERs (VWO) is one of the biggest ETFs pegged to this segment, and the move to include A-shares will likely also be replicated in other big ETFs, such as the iShares MSCI Emerging Markets Index ETF (EEM).

On June 9, MSCI Inc., whose MSCI Emerging Markets Index is the most widely tracked benchmark of share-price performance outside the developed world, is set to announce if it plans to add mainland Chinese stocks to its index during the coming year.

If MSCI adds A-shares to the Index, it would effectively force fund managers around the world to begin buying A-shares in an effort to mirror the MSCI Emerging Markets Index ETF (EEM) and its revised holdings.

A move to add the A-shares would undoubtedly cause the value of stocks in ASHR to extend their winning ways, as this would be an extremely bullish tailwind for the segment.

The move to add A-shares by Vanguard, and the likely move to also do so by MSCI, is the kind of trend you want to be invested in. Of course, stocks in China can be volatile, so that means you also need to have a guide dog by your side to help avoid stepping into a pothole.

Right now, subscribers to my Successful ETF Investing newsletter are profiting mightily from allocations to China. In fact, we just added two new China ETFs to our holdings.

To find out more about China, and how to make the big money riding this fire-breathing dragon, check out Successful ETF Investing today!

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