Ten A-Shares To Get Acquainted With Article

The companies that list shares in Mainland China are extremely well represented in the global economy. They include the world’s largest battery manufacturer, the world’s largest solar panel manufacturer, the world’s third-largest electric vehicle manufacturer, and one of the world’s leading medical devices companies, among other notable multinationals. However, China’s Mainland equity market is not well represented within global indexes.

Indexes’ lack of exposure to this crucial cross-section of the global economy has placed investors at a disadvantage. Over the past ten years, China’s A share market has outperformed the MSCI China Index and exhibited a lower correlation to US and global equity markets.

Please click here for KBA standard performance.

A-shares represent 50% of China’s equity market by market capitalization, but only 16% of the MSCI China Index.¹ We believe that including a dedicated exposure to the 50 largest, most liquid A shares using the KraneShares MSCI China A 50 Connect Index ETF (Ticker: KBA) can reduce volatility and improve returns in your China allocation.

Below are key facts and figures about the top ten holdings in KBA by weight as of May 25, 2023.

Kweichow Moutai (7.83% of KBA Net Assets as of 3/31/2023)

Kweichow Moutai is an alcoholic beverage company specializing in Baijiu, a popular liquor in China. Kweichow Moutai gets its name from the town of Maotai in Guizhou Province, Southwest China, where the liquor giant got its start. The company’s baijiu, a popular Chinese grain liquor, is a highly sought-after, premium product that often sells out in stores.

• Market Capitalization: $289 billion
• 2022 Revenue: $18 billion
• 2022 Net Margin: 49%
• 5 Year Average Annual Revenue Growth Rate: 17%
• 5 Year Average Annual Revenue Growth Rate of Global Comparable: 8% (Diageo)

Contemporary Amperex Technology (6.63% of KBA Net Assets as of 3/31/2023)

Founded in Ningde, Fujian Province in 1999 as a consumer electronics battery maker, Contemporary Amperex Technology has become the world’s largest battery manufacturer. The company is a supplier of batteries to many automotive manufacturers including Ford and BMW. The company currently offers one of the best ranges on the market for electric vehicle batteries in its “Qilin” battery pack model.

• Market Capitalization: $138 billion
• 2022 Revenue: $46 billion
• 2022 Net Margin: 9%
• 5 Year Average Annual Revenue Growth Rate: 102%
• 5 Year Average Annual Revenue Growth Rate of Global Comparable: 1% (Panasonic)

Wanhua Chemical (7.08% of KBA Net Assets as of 3/31/2023)

Wanhua Chemical Group is an innovative producer of industrial chemicals used in a multitude of consumer products globally. The company got its start in 1978 in Yantai, Shandong Province as a producer of synthetic leather. The company’s slogan is “Chemistry makes life better.”

• Market Capitalization: $36 billion
• 2022 Revenue: $23 billion
• 2022 Net Margin: 10%
• 5 Year Average Annual Revenue Growth Rate: 25%
• 5 Year Average Annual Revenue Growth Rate of Global Comparable: 1% (Dow Chemical)

Zijin Mining (4.93% of KBA Net Assets as of 3/31/2023)

Zijin Mining Group is a multinational mining company involved in the exploration, extraction, and refining of copper, gold, zinc, lithium, and aluminum. Most the company’s mining operations are in Mainland China, though the company also has operations in various locations in Eastern Europe, Southern Africa, and South America. Founded in 1986 as the Shanghang Minerals Company, the company gets its current name from the Zijinshan gold and copper mine, the company’s first large-scale mining site in Fujian Province.

• Market Capitalization: $40 billion
• 2022 Revenue: $38 billion
• 2022 Net Margin: 7%
• 5 Year Average Annual Revenue Growth Rate: 27%
• 5 Year Average Annual Revenue Growth Rate of Global Comparable: 6% (Antofagasta)

LONGi Green Energy (4.93% of KBA Net Assets as of 3/31/2023)

LONGi Green Energy is a leading global supplier of renewable energy technologies including photovoltaics. LONGi was founded in 1986 and named for the former president of Lanzhou University, reflecting the company’s commitment to education-driven technology. The company has a long history of technological innovation starting with semiconductor manufacturing. LONGi solidified its lead in solar power technologies over the course of the 2010s.

• Market Capitalization: $31 billion
• 2022 Revenue: $18 billion
• 2022 Net Margin: 11%
• 5 Year Average Annual Revenue Growth Rate: 54%
• 5 Year Average Annual Revenue Growth Rate of Global Comparable: 22% (NextEra Energy)

BYD (3.43% of KBA Net Assets as of 3/31/2023)

BYD, which stands for “Build your dreams,” is one of the largest electric vehicle manufacturers in the world. Despite historically focusing on large commercial and public vehicles such as buses, BYD has recently developed an exceedingly successful line of consumer vehicles. BYD is also notable for being one of legendary investment firm Berkshire Hathaway’s largest and most lucrative investments.¹

• Market Capitalization: $103 billion
• 2022 Revenue: $59 billion
• 2022 Net Margin: 4%
• 5 Year Average Annual Revenue Growth Rate: 48%
• 5 Year Average Annual Revenue Growth Rate of Global Comparable: 49% (Tesla)

China Merchants Bank (3.39% of KBA Net Assets as of 3/31/2023)

China Merchants Bank (CMB) is one of the largest banks in China serving mostly commercial customers in a wide range of capacities including savings products, credit cards, business loans, and investment banking. CMB is the eighth largest bank in China by assets and is similar in size to Citigroup, the fourth largest bank in the United States.

• Market Capitalization: $120 billion
• 2022 Revenue: $68 billion
• 2022 Net Margin: 39%
• 5 Year Average Annual Revenue Growth Rate: 8%
• 5 Year Average Annual Revenue Growth Rate of Global Comparable: 13% (Citigroup)

Luxshare Precision (3.44% of KBA Net Assets as of 3/31/2023)

Luxshare Precision is an information technology hardware company that specializes in high end connectors. The company is a major supplier for Apple and was recently tapped by Apple to supply parts for its first-generation augmented reality (AR) products.² The company was founded in 2004 and is headquartered in Dongguan, Guangdong Province.

• Market Capitalization: $29 billion
• 2022 Revenue: $30 billion
• 2022 Net Margin: 4%
• 5 Year Average Annual Revenue Growth Rate: 59%
• 5 Year Average Annual Revenue Growth Rate of Global Comparable: 34% (AMD)

Tongwei (2.82% of KBA Net Assets as of 3/31/2023)

Tongwei is technology company that specializes in photovoltaic cells and components (solar panels). The company also has a significant business involving livestock feeding systems and medications. The company was founded in 1995 in Chengdu, Sichuan Province and serves customers globally, who benefit from its research and development focus.

• Market Capitalization: $20 billion
• 2022 Revenue: $20 billion
• 2022 Net Margin: 18%
• 5 Year Average Annual Revenue Growth Rate: 50%
• 5 Year Average Annual Revenue Growth Rate of Global Comparable: 22% (NextEra Energy)

Mindray (2.51% of KBA Net Assets as of 3/31/2023)

Mindray is a leading supplier of medical devices worldwide. During the pandemic, the multinational company supplied ventilators to global hospitals. In addition to its headquarters in Shenzhen, the company also has branches and research and development facilities on six continents.

• Market Capitalization: $52 billion
• 2022 Revenue: $4 billion
• 2022 Net Margin: 32%
• 5 Year Average Annual Revenue Growth Rate: 21%
• 5 Year Average Annual Revenue Growth Rate of Global Comparable: 7% (Abbott Labs)

Citations:

1. Gordon, Nicholas. “Charlie Munger says BYD was his best investment at Berkshire Hathaway – it’s ‘almost ridiculous’ how much it’s beating Elon Musk’s Tesla,” Fortune. February 16, 2023.
2. Li, Lauly. “Apple taps China’s Luxshare to develop augmented reality device,” Nikkei Asia. February 23, 2023.