Time To Buy China ETFs (NYSEARCA FXI NYEARCA HAO NYSEARCA GXC NYSEARCA MCHI)
Post on: 26 Апрель, 2015 No Comment
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China posted a GDP growth rate of 7.5% in the third quarter of fiscal 2012, which was growth rate in 2012. The GDP growth rate is expected to be at 7.5% for 2013. For 2013, the economy is expected to grow at the rate of 8% which is higher than the expected growth rate for 2012.
Growth of 10.1% in industrial production is also an evidence of the fact that the economy has bottomed out and is now turning slowly towards the path of recovery. However, the pace of growth will likely not match past performance. At least there is hope that the economy will once more pick up steam, avoiding a hard landing (Three China ETFs Still Going Strong ).
Still, one discouraging factor regarding the economy is its export growth of just 2.9% in November. This may be due to the recession in Europe and Japan which resulted in dwindling demand for Chinese goods offset somewhat by improving demand from the U.S. However, the sequester and higher taxes may offer renewed threat to exports to the U.S.
To prevent this from being an issue, the Chinese government is taking measures to stimulate domestic demand in order to support GDP growth in 2013.
With an overall improvement in the Chinese economy, albeit at a slower pace, it is time to get back to Chinese ETFs. Chinese ETFs, which floundered throughout 2012, have shown signs of recovery on the back of a rebounding domestic economy (Do ETFs Suggest that the China Panic is Over? ).
So, it could be time to take a closer look at any of the many China ETFs currently trading on the market. Below, we have highlighted four of the more popular options in the segment, any of which could be an interesting way to target the Chinese economy as we head into the Chinese New Year:
FTSE China 25 Index Fund (NYSEARCA:FXI)
FXI is the most popular fund in the family of ETFs providing exposure to the Chinese equity market. FXI is both rich in asset base and volume. The fund manages an asset base of $7.3 billion and trades at a volume level of more than 16 million shares a day.
The fund’s exposure to Chinese stocks is limited to a small basket of 26 stocks. It does not therefore have a broad exposure to the country’s securities. Also, the fund is biased towards the top ten holdings as more than 60% of the asset base goes towards them.
Among individual holdings, China Mobile, China Construction Bank and Industrial and Commercial Bank of China take the top three positions. For investment in the fund, FXI charges a fee of 74 basis points from investors.
The performance of the fund has been disappointing in 2011 as it delivered a negative return of 17.7%. However, the fund has remarkably recovered from the 2011 debacle and has delivered a return of 3% over a period of one year.
Guggenheim China Small Cap ETF (NYSEARCA:HAO)
HAO taps the small cap securities of the Chinese market that have market capitalization of a maximum $1.5 billion and a minimum of $200 million. HAO provides investors a broad exposure to the small cap securities of China.
The fund holds a basket of 226 securities of which 54% are mid cap and 32% are small cap. This indicates that the fund does not offer a pure play in small cap securities and has exposure to even large caps and mid caps.
HAO has a diversified fund with just 15.6% of the asset base invested in the top ten holdings. Among individual holdings, Great Wall Motors takes the top spot, followed by Longfor Properties and Sino Ocean Land Holdings (read Try Small Cap ETFs to Gain from Chinese Domestic Demand ).
Among sector holdings, the fund assigns double-digit allocation to industrials, financials, consumer discretionary and materials. Among others, the fund does not invest more than 9.58%. The fund delivered a return of 12% over a period of one year.
SPDR S&P China ETF (NYSEARCA:GXC)
GXC also provides a broad exposure to Chinese securities through a basket of 217 stocks. In this basket, the fund invests an asset base of $969.8 million. For this the fund charges an expense ratio of 59 basis points.
The fund is moderately diversified with 45.6% of the asset base going towards them. Among individual holdings, China Construction Bank gets the top most position with a share of 7.58% while the second and third positions have been assigned to China Mobile and Industrial and Commercial Bank of China with asset investment of 7.47% and 6.15%, respectively.
For sector holdings, the fund assigns double-digit allocation to financials, energy and information technology. Among others, the fund does not invest more than 9.69%. The fund delivered a return of 6.3% over a period of one year.
MSCI China Index Fund (NYSEARCA:MCHI)
For exposure in large cap securities of China, investors can look to invest in MSCI China Index Fund Profile. The fund invests 79% in large caps while the rest goes towards medium and small caps (Comprehensive Guide to Total Market ETFs ).
The fund is home to 137 large cap Chinese stocks in which it invests an asset base of $802.9 million. It also offers liquidity to investors as more than 100,000 shares trade in an average day.
The fund is biased towards the top 10 holdings as more than 50% of its assets are invested in these stocks. Among individual holdings, China Mobile Ltd is in the top spot with 10.03% of assets invested.
This is closely followed by China Construction Bank and Industrial & Commercial Bank of China. The expense ratio comes in at 58 basis points annually.
Among sector holdings, financials takes the top position with an asset investment of 38.6% while energy and telecommunication take the other two spots with respective shares of 17.62% and 12.44% of the fund. The fund delivered a return of 8.7% over a period of one year.
This article is brought to you courtesy of Eric Dutram From Zacks .