Are you interested in the market movements of China but don’t know which securities you should add to your portfolio?
It’s no secret that China has become one of the fastest-growing global economies. It would make sense if you would want to get a piece of the pie by investing in Chinese companies. Not sure where to begin?
My advice is to invest in Exchange-Traded Funds (ETFs) trading on the TSX that track the performance of Chinese markets. The best China ETFs in Canada can help you invest in a basket of Chinese securities without purchasing individual stocks.
By the time you are done reading this list, I am confident you can make a more well-informed decision about which ETF provides you with exposure to the Chinese stock market and aligns with your investment goals.
What is the Best China ETF in Canada?
The best China ETFs in Canada are ETFs tracking publicly listed Chinese companies and give investors access to Chinese markets without the need to directly purchase those stocks.
They allow Canadian investors a way to geographically diversify their portfolios by owning companies in the world’s second-largest economy.
China has a significant number of state-owned Chinese enterprises. However, there still are Chinese companies whose shares are publicly traded and provide investors with opportunities. China ETFs trading in Canada own shares of some of the top Chinese companies, including the Alibaba Group Holding Ltd., Ping An Insurance Group Co. of China Ltd., and several others.
Investing in China ETFs carries its fair share of risks, such as trade tensions with the world’s biggest economy and our neighbors, the US. Still, many investors are placing long-term bets on China, and the list of the best China ETFs in Canada can help you get the start you need. (Data as of Jan 2022)
Dividend Yield: 1.87%
Assets Under Management: $74.14 million
The BlackRock iShares China Index ETF is one of the best China ETFs in Canada. The ETF seeks to provide its investors with long-term capital growth by replicating the performance of the FTSE China 50 Index, net of expenses.
This BlackRock iShares ETF effectively provides investors with exposure to 50 of the largest publicly-traded Chinese companies in terms of the market cap within a single fund. Bear in mind that the ETF does not directly invest in a basket of companies.
Rather, its biggest holding is the iShares China Large-Cap ETF trading on the NYSE. The medium- to high-risk fund is mostly focused on China’s finance sector with a 35.98% weighting on financials.
2. BMO China Equity Index ETF
Dividend Yield: 0.57%
Assets Under Management: $102.84 million
The BMO China Equity Index ETF is an ETF designed to replicate the performance, to the extent possible, of the S&P/BNY Mellon China Select ADR Index, net of expenses. The ETF provides investors with exposure to the broader Chinese equity market by holding a portfolio of American Depositary Receipts.
The underlying index comprises a group of American depositary receipts traded on the NYSE, NYSE Amex, or NASDAQ that are domiciled in China. The ETF can align with the goals of investors looking for high-growth solutions.
The high growth prospects also entail a high-risk factor. Investors should have a high-risk tolerance if they want to invest in this ETF.
3. Vanguard FTSE Emerging Markets All Cap Index ETF
Dividend Yield: 1.65%
Assets Under Management: $1.6 billion
The Vanguard FTSE Emerging Markets All Cap Index ETF is not an ETF named explicitly to indicate that it is tracking the Chinese stock market.
The objective of the FTSE Emerging Markets All Cap Index ETF is to track, to the extent possible, the performance of a broad emerging markets index. Currently, the ETF is tracking the FTSE Emerging Markets All Cap China A Inclusion Index.
The fund invests directly or indirectly in large-, mid-, and small-capitalization stocks of companies located in the emerging markets. It invests primarily in the US-domiciled Vanguard FTSE Emerging Markets ETF. The ETF has a lower MER compared to most of the other ETFs listed in the guide, making it an attractive option to consider.
4. First Asset CI ICBCCS S&P China 500 Index ETF (Unhedged)
Dividend Yield: 1.19%
Assets Under Management: $9.94 million
The First Asset CI ICBCCS S&P China 500 Index ETF seeks to track, to the extent possible, the price and yield performance of the S&P China 500 Index, before fees and expenses. The underlying ETF selects the largest 500 companies from the S&P broader S&P Total China BMI Index.
The Index represents the entire investment universe of Chinese companies that qualify for the minimum market cap and trading volume thresholds based on their market capitalizations.
Most other ETFs in the list of the best China ETFs in Canada have a more focused approach towards investing in Chinese companies. However, CHNA.B provides investors with exposure to a broad range of equity securities in Chinese companies.
5. Horizons China High Dividend Yield Index ETF
Ticker: TSX:HCN (Delisted and discontinued)
Dividend Yield: 6.32%
Assets Under Management: $9.57 million
Note that this ETF has been discontinued by Horizons, most likely due to very low assets under management. I left this in the list though, because I wanted to highlight an important risk to take into account. The less popular an ETF is, the more likely the fund could potentially be closed. This could have some bad tax consequences in non-registered accounts because if you are forced to sell at a gain, you will have to pay taxes.
The Horizons China High Dividend Yield Index ETF fundamentally focuses on replicating, to the extent possible, the performance of the Hang Seng High Dividend Yield Index (the “Underlying Index”), net of expenses. The ETF invests primarily in the Underlying ETF.
The underlying index is designed to measure the performance of Hong Kong-listed equity securities that are primarily characterized by their high yields.
Some of the ETF’s top holdings include Agile Group at 4.12%, Vtech Holdings at 3.41%, and Xinyi Glass at 3.34%. The ETF might be more suitable for investors chasing a higher yield for returns instead of focusing solely on capital gains.
How to Buy China ETFs in Canada
The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:
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To learn more, check out my full breakdown of the best trading platforms in Canada here.
The best China ETFs in Canada can get you more convenient exposure to Chinese markets without letting you make the effort of researching and choosing individual stocks. Additionally, not all China ETFs in Canada are made the same. Each ETF offers a basket of companies that you can invest in based on your investment goals.
You can consider investing in the ETFs depending on what your investment goals are. If you want a simple solution, consider investing in an all-in-one ETF.