Small Cap Stocks Outperform Most Other Chinese Funds

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.
[Chinese Dragon]

The Chinese market was very strong in the first half of 2015, so it is no surprise that the silver medalist for emerging-market exchange-traded funds (ETFs) in that time period was another Chinese fund: Harvest CSI 500 China A-shares Small Cap ETF (ASHS).

That fund was one of the first to give foreign investors access to China A-share equities. ASHS tracks a group of 500 small-cap companies listed on the Shanghai and Shenzhen stock exchanges. These companies range across a variety of sectors.

View the current price, volume, performance and top 10 holdings of ASHS at ETFU.com.

By the end of June, ASHS had gained 61.12% for the year. The performance of this fund and the top performer, Market Vectors ChinaAMC SME-ChiNext ETF (NYSE: CNXT), were much stronger than any other funds in the category, with more than double the returns of the third-best fund. Even in the less bullish Q2, ASHS was able to gain 17.31%. Overall, that part of the year saw highly impressive performances out of China, especially in CNXT and ASHS. Since June, the performance of ASHS has suffered, as the fund has given back much of the gain.

This fund held $71.27 million in assets under management at mid-year. This amount falls beneath my recommended threshold for investment. However, this ETF’s strategy is one that is worth bringing to your attention. The more knowledge you have as an investor, the better you can make informed decisions.

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The top 10 holdings for this fund make up 7.91% of its investments. The top five are Eternal Asia Supply Chain Management Ltd., 1.40%; Yihua Timber Industry Co. Ltd., 0.91%; Hainan Haiyao Co. Ltd., 0.81%; Shanghai Feilo Co. Ltd., 0.78%; and Zhongyuan Union Cell & Gene Engineering Co. Ltd., 0.74%. The fund is spread across most sectors, but its largest components are industrials, consumer discretionary and materials.

Small-cap stocks should perform well in a Chinese stock market recovery. If you think the end of the Chinese bear market is coming soon, Harvest CSI 500 China A-shares Small Cap ETF (ASHS) may be a good place to look for guidance.

Exclusive  This Fund Could Give Investors Utility

Remember to look for the current price, volume, performance and top 10 holdings of ASHS at ETFU.com.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed it, I encourage you to read my e-letter column from last week about a small-and-medium-cap China fund. I also invite you to comment in the space provided below.

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The market closed last Friday with two of the three major indices -- the S&P 500 and the Nasdaq Composite Index -- in the red. For the week, all three were down, with the Nasdaq Composite Index falling the most at 2.9%. Closing out the week, on a year-to-date basis, all three were also in the red, with the Nasdaq down modestly and 6-8.5% drops for the S&P 500 and Dow Jones Industrial Average. Those latter two indices were hit by Caterpillar (CAT) shares, which fell from Wednesdayâ€

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