Understanding China A-Shares: Top ETFs to Watch

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The recent finalisation of a trade understanding between the US and China, as announced by US Commerce Secretary Howard Lutnick, signals a positive shift in the Chinese market. The agreement, which includes China’s commitment to deliver rare earth minerals and the US’s promise to lift countermeasures, reflects a significant easing of trade tensions.

The collaborative efforts and successful negotiations underscore a growing optimism in the market, suggesting a more stable and cooperative trade relationship moving forward. As a barometer, we can examine the recovery of the China A50 index, which tracks the 50 largest A-share stocks on the Shanghai and Shenzhen Stock Exchanges. Following a nearly 10% drop in response to Trump’s US Reciprocal Tariff announcement in early April, the index has since made a full recovery.

Source: Google Finance

This signals investor confidence in the performance of Chinese equities, and perhaps that a more permanent tariff solution will be found.

The Chinese Growth Story Still Intact; Too Big to Ignore

As the world’s second largest economy, investors cannot afford to completely ignore China. While its economy and stocks were weighed down by slowing growth and tightening regulatory framework in recent years, its long-term growth story remains intact – underpinned by its vast consumer base, innovation in technology and strategic policy directions.

Fuelled by targeted government stimulus and pro-growth policies, investor sentiments had begun to turn more optimistic – before Trump’s US Reciprocal Trade Tariff announcements.

With momentum swinging in its favour again, Chinese equities may be on the radar for Singapore investors.

The FTSE China A50 Index, which tracks the performance of the 50 largest listed stocks, boasts lower price-to-earnings (P/E) and price-to-book (P/B) ratios than many other major indices worldwide, suggesting that Chinese equities have more attractive valuations.

Those looking to capitalise on China’s increasing importance on the global stage may want to consider what is known in China equity markets as “A-shares” – to invest directly into its stock market.

Read Also: Where Are The Best Investment Opportunities In Asia Right Now?

Investing In China A-Shares

China A-shares are issued by Chinese companies that are incorporated and listed on the mainland. They are transacted in Chinese yuan (RMB) and were originally exclusive only to domestic investors.

Today, international retail investors can purchase eligible A-shares directly through the Stock Connect Programme, which links the stock markets in Shanghai and Shenzhen to the stock market in Hong Kong. In Singapore, there are currently two main ways to get exposure to China A-shares: investing in the stocks directly via the Stock Connect Programme with Hong Kong or investing in SGX-listed China-focused ETFs. SGX has partnered the Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) via an ETF Product Link – creating a Master-Feeder model that allows Singapore investors to benefit from AUM and liquidity of Master ETFs listed on the SSE or SZSE.

Source: China ETF Highlights

Investing in China A shares can give you diverse opportunities to gain exposure in many of the country’s giants. For a start, the investment universe contains almost 3,000 eligible companies – listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange.

Many of these companies may also be well-known to you, ranging from banking and finance giants, China Merchant Bank, ICBC Bank of China, and Ping An Insurance, to alcohol producer Kweichow Moutai, to the major players in China’s electrical vehicle market such as BYD and CATL, to consumer appliance manufacturer Midea Group.

Investing in China A-Shares ETFs: Large-Caps, Dividends, and Growth Opportunities

China-focused ETFs can be grouped into three main categories:

• Large-Caps – these track the largest listed stocks, using underlying indices like the FTSE China A50 Index, for balanced exposure and to capitalise on long-term growth.
• Dividend Focused – these track the top dividend-paying companies, using indices like the CSI Dividend Index, for income-focused investors looking for companies that offer higher dividends.
• Growth and Technology Focused – these track the fastest-growing listed companies, especially in the technology industry, using indices like the CSI STAR and ChiNext Index, for investors willing to take on higher risk for high returns.

Read Also: 6 Important Themes To Watch For When You Invest In 2025

Invest in A-Shares ETFs for Tax Savings and Long-Term Growth

The benefit of investing in China-focused ETFs on the SGX is the familiarity of doing so in the same way we already invest in Singapore companies and REITs. This means we can continue to buy and sell in Singapore Dollar (SGD) or US Dollar (USD) rather than consider a new currency in the RMB.

We can also continue using our existing stock brokerage firm, as not all brokerages will offer low-cost access to the China stock market. We can also monitor our holdings within a single platform, whether it is through a single brokerage or via our CDP account, as well as trade during Singapore trading hours, rather than considering the China market’s trading hours.

Like other ETFs listed on SGX, all A-Shares ETFs are eligible for investment via the Supplementary Retirement Account (SRS), allowing you to enjoy tax savings while building your long-term portfolio.

For those who prefer a Dollar-Cost-Averaging (DCA) strategy, these ETFs can be accessed through regular savings plans offered by providers such as iFast and Phillip Securities.

Introducing the first SGD-Hedged A-Shares ETF – Amova E Fund ChiNext Index ETF

The ChiNext Index is the gateway to China’s most dynamic growth themes like Energy Transition,  Next-Gen Automation, MedTech, and Smart Infrastructure – enjoying tailwinds from China’s national priorities.

The Amova E Fund ChiNext Index ETF is the first SGD-hedged A-Shares ETF listed on SGX, minimising currency risk for Singapore investors. It also offers the highest cost-efficiency with management fee as low as 0.30% per annum.

Several constituents of the ChiNext Index are beneficiaries of China’s strategic goals. The country’s push for solar and carbon neutrality will benefit Sungrow Power Supply, which specialises in solar inverters and energy storage systems. Battery manufacturing companies like CATL and EVE Energy have made great strides following significant government investments into energy storage and tech self-sufficiency – more than USD230 billion between 2009 and 2023.