Chinese stocks are down 12% since the start of this year. The markets have been reflecting investor worries that the country’s economic growth will continue to lag along with its exports to Europe and the U.S. China’s inflation rate is also rising, which could make it more difficult to spur growth through stimulus spending or lower interest rates. Still, the long-term outlook is bright.
Here are two Chinese ETFs we cover in our advisory on conservative investing, Canadian Wealth Advisor. One of these funds invests in all publicly traded Chinese stocks available to foreign investors. The other holds small cap Chinese stocks.
SPDR S&P CHINA ETF (New York Exchange symbol GXC; buy or sell through brokers; www.spdrs.com) is an ETF that aims to track the S&P China BMI Index, which is made up of all publicly traded Chinese stocks that are available to foreign investors. Right now, SPDR S&P China ETF holds 184 stocks.
The $1.1-billion fund’s top holdings are China Construction Bank, 7.9%; China Mobile, 6.7%; Industrial & Commercial Bank, 6.2%; Tencent Holdings, 4.1%; Bank of China, 4.0%; CNOOC Ltd., 3.9%; PetroChina, 3.5%; Baidu, 2.9%; China Petroleum & Chemical, 2.5%; and China Life, 2.5%;
The fund’s breakdown by industry is as follows: Financials, 34.9%; Oil and Gas, 14.0%; Information Technology, 11.4%; Industrials, 9.2%; Telecommunication Services, 8.6%; Consumer Discretionary, 6.2%; Consumer Staples, 5.6%; Basic Materials, 4.8%; Utilities, 3.2%; and Health Care, 2.1%.
The ETF was launched on March 19, 2007. It has a 0.59% MER and yields 2.9%. SPDR S&P China ETF is a buy for aggressive investors.
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GUGGENHEIM CHINA SMALL CAP ETF (New York Exchange symbol HAO; buy or sell through brokers; www.guggenheimfunds.com) aims to track the AlphaShares China Small Cap Index, which is made up of all Chinese stocks that are legal for foreign investors and have market caps between $200 million and $1.5 billion.
The $266.7-millon fund’s top holdings are Youku Tudou, 1.3%; Sino Biopharmaceutical, 1.2%; China Resources Gas Group, 1.2%, Air China, 1.1%; Tsingtao Brewery Co., 1.1%; Guangzhou R&F Properties, 1.0%; BYD Co., 1.0%; Nine Dragons Paper Holdings, 1.0%; China Everbright International, 1.0%; and China Communications Services Corp., 1.0%.
The ETF was launched on January 30, 2008. It has an expense ratio of 0.70% and a 1.4% yield.
In the latest issue of Canadian Wealth Advisor, we assess the prospects for the Chinese economy, domestic spending and programs the government is likely to implement to ease the gap between rich and poor and how these long-term initiatives are liable to affect Chinese stocks. We conclude with our clear buy-hold-sell advice on both of these exchange-traded funds.
COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca members
Worries about slower economic growth in China triggered a sell-off in global markets in the past week. As an investor, how do you react to such an abrupt downturn in the stock market? Have you emerged reasonably well from past market sell-offs? Let us know what you think.
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