Market Vectors Launches Innovative China ETF [iShares FTSE/Xinhua China 25 Index (ETF)]

market vectorsThe sentiment about China is slowly turning positive, given the fact that the economy has lately been divulging some encouraging economic numbers. China grew at a slightly higher-than-anticipated rate during the second quarter.

Moreover, the manufacturing sector is showing a strong recovery with July clocking the fastest pace of growth in 18 months, as per an initial HSBC survey. It seems that the effect of mini-stimulus measures by the government is slowly trickling down.

Given the improving prospects, it seems like a pretty opportune time for issuers to launch China ETFs that focus on the upcoming high flying sectors of the economy, rather than on traditional sectors like Financials and Energy. While a few have tried this approach in ETF form, the latest to follow the trend is Market Vectors.

The issuer has recently launched its new product – ChinaAMC SME-ChiNext ETF under the ticker CNXT. It looks to directly invest in China A-shares through the Sub-Adviser’s RQFII quota.

CNXT in Focus 

The passively managed ETF tracks the performance of the SME-ChiNext 100 Index to provide exposure to the 100 largest and most liquid stocks listed and trading on the Small and Medium Enterprise (“SME”) Board and the ChiNext Board of the Shenzhen Stock Exchange.

The index is heavily exposed to the Information Technology and Consumer Discretionary sectors, with the duo occupying a little under half of the total fund allocation. Apart from this, Industrials and Health Care also have double-digit allocations in the fund, with Financials and Energy having the least exposure.

However, the index does a good job of spreading its asset well across individual holdings. None of the stocks have more than a 4% exposure in the fund. Currently, Suning Commerce, Hikvision and Huayi Brothers occupy the top three spots in the fund.

As far as expenses are concerned, the fund charges 68 basis points a year in fees, in line with many other China ETFs. However, as the fund has just been launched, it is expected to have little in assets and volume for the time being and thus bid ask spreads may be wide, at least initially.

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