The long-term outlook for China, and Chinese stocks, is bright. And one of the best ways for investors to tap into that growth is through low-fee exchange-traded funds (ETFs).
Here are two Chinese ETF recommendations. One invests in all of the publicly traded Chinese stocks available to foreign investors. The other holds small-cap Chinese stocks.
SPDR S&P CHINA ETF [1] $83.37 (New York Exchange symbol GXC; buy or sell through brokers; www.spdrs.com), is an exchange-traded fund that aims to track the S&P China BMI Index. This index is made up of all of the publicly traded Chinese stocks that are available to foreign investors. Right now, SPDR S&P China ETF holds 147 stocks.
The $730.3-million fund’s top holdings are: China Construction Bank, 7.4%; China Mobile, 6.8%; Industrial & Commercial Bank of China, 5.2%; Bank of China, 4.4%; China Life Insurance, 4.4%; CNOOC Ltd., 4.2%; Baidu Inc., 4.0%; PetroChina, 3.4%; Tencent Holdings Ltd., 2.6%; and China Petroleum & Chemical, 2.2%.
The fund’s breakdown by industry is as follows: Financials, 33.6%; Oil and Gas, 14.5%; Information Technology, 11.4%; Telecommunication Services, 8.9%; Consumer Discretionary, 7.2%; Basic Materials, 5.6%; Consumer Staples, 5.2%; Utilities, 2.0%; and Health Care, 1.0%.
SPDR S&P China ETF was launched on March 19, 2007. The ETF has a 0.59% MER and yields 1.6%.
SPDR S&P China ETF is a buy for aggressive investors.
GUGGENHEIM ALPHASHARES CHINA SMALL CAP INDEX ETF [2] $32.72 (New York Exchange symbol HAO; buy or sell through brokers; www.guggenheimfunds.com) is the new name of Claymore/AlphaShares China Small Cap Index ETF. Guggenheim Partners bought Claymore Group in 2009, and has renamed the Claymore funds.
This ETF aims to track the AlphaShares China Small Cap Index. This index is made up of all investable Chinese stocks with market caps between $200 million and $1.5 billion.
The $496.6-million fund’s top holdings are PICC Property & Casualty, 2.6%; Focus Media Holdings, 2.1%; Air China, 2.0%; Weichai Power Co., 1.9%; Yangzijiang Shipbuilding, 1.8%; Cosco Pacific, 1.8%; Brilliance China Automotive Holdings, 1.8%; Shandong Wiegao Group Medical, 1.6%; Sohu.com, 1.6%; and ZTE Corp., 1.5%.
As China’s economy matures, and consumers feel more protected by the expanding social-safety net, domestic spending should rise. This fund is well positioned to benefit from that trend.
The ETF was launched on January 30, 2008. It has an expense ratio of 0.70%. The fund’s dividend yield is 0.1%.
Guggenheim/AlphaShares China Small Cap Index ETF is a buy for aggressive investors.