Should Investors Stay Clear Of China Focused ETFs?
“The Chinese government warned Thursday that a reduction in global stimulus policies beyond its control could affect China’s asset prices in a volatile manner. That warning followed other interesting reports earlier this week on China’s January economic performance and the government’s plans going forward. All of this information raises some concerns about China’s economy and whether investors should use China-focused ETFs at this time, such as the most popularly traded one, iShares FTSE/Xinhua China 25 Index (FXI),” Don Dion Reports From The Street.
Dion Continues to say, “The January report grabbing the most headlines this week was the increase in Chinese exports by 21% and imports by 86% from a year earlier. The large increase in imports is reflective of a more active domestic consumption that is linked to government stimulus measures and increasing personal incomes. The dual influence of wealthier individuals and stimulus from the government also helped create another headline grabbing figure for January.”
“Also, as opposed to the popular FXI, I would recommend that investors choose Claymore/AlphaShares China Small Cap (HAO). That’s because out of the China funds, its companies would benefit most from domestic consumption, the expansion of which is a top priority for the government. HAO’s chart also looks less bearish than FXI’s currently.In the near term, the government has an asset bubble concern that may prevent it from extending stimulus measures and we saw last month how cranky the markets got when credit tightening and stimulus reduction was a looming issue. Also, now coming into play thanks to Greece, will be a potentially extended depression in the value of the euro, which, although China has done a good job spurring domestic and regional demand, will hurt exports and the bottom line of its economy this quarter,” Dion Reports.
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The investment (FXI) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/Xinhua China 25 index. The fund generally invests at least 90% of assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. The underlying index consists of 25 of the largest and most liquid Chinese companies. It may invest the remainder of assets in securities not included in its underlying index but which BGFA believes will help the fund track the underlying index. The fund is nondiversified.
| TOP 10 HOLDINGS ( 61.29% OF TOTAL ASSETS) |
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The investment (HAO) seeks to replicate, net of expenses, the AlphaShares China Small Cap Index. The fund will invest at least 90% of assets in common stock, ADRs, GDRs, ADSs and IDRs that comprise the index. The index is designed to measure and monitor the performance of publicly-traded mainland China-based small capitalization companies. The fund is nondiversified.
| TOP 10 HOLDINGS ( 15.69% OF TOTAL ASSETS) |
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