Saturday, April 29th, 2017

The Best China-Specific ETF? The Answer May Surprise You


China-Specific ETF A New Profit Earner Emerges

WisdomTree Eyes Emerging Markets Debt With New ETF
About: China-specific ETFs, Claymore/AlphaShares China Small-Cap ETF (NYSE: HAO), HAO, Hong Kong-specific ETFs, Taiwan-specific ETFs,iShares/Xinhua FTSE China 25 Index (NYSE: FXI), Claymore/AlphaShares China Technology ETF (NYSE: CQQQ),
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            Perhaps no segment of the equity ETF universe epitomizes the rapid growth of ETFs as an asset class than ETFs that focus on China. That’s probably not a coincidence as U.S. investors have craved new ways to tap into the China growth story. When you factor in the Taiwan and Hong Kong-specific ETFs, the number of ETFs offering China exposure to U.S. investors is around 20. That’s roughly triple the amount that were available in 2008.

            Twenty is a high enough number to make selecting the right China ETF a confounding endeavor. Everyone knows about the iShares/Xinhua FTSE China 25 Index (NYSE: FXI). FXI is the most heavily traded China ETF and has over $8.1 billion in assets, but only holds 25 stocks with a somewhat risky 47% weight to financials.

WisdomTree Eyes Emerging Markets Debt With New ETF

            The best performing China ETF thus far in 2010 has been the Claymore/AlphaShares China Technology ETF (NYSE: CQQQ), but this is a relatively new entrant to the China ETF fray and daily volume is slight at less than 23,000 shares. Our choice as the best China ETF is the Claymore/AlphaShares China Small-Cap ETF (NYSE: HAO).

            HAO has almost $317 million in assets and is up 8% year-to-date, making it the second-best performer among China ETFs behind CQQQ. HAO holds 157 stocks with a maximum market cap of $1.5 billion and at the sector level, HAO is far more diverse than FXI. Five sectors have double-digit weights in HAO, led by industrials at about 28.5%.

            HAO and FXI have no overlap, so investors could theoretically own both at the same time, but HAO offers the better exposure to China’s diversifying economy. The potential emergence of a real middle class in China makes HAO a compelling long-term play as well.


2 Responses to “The Best China-Specific ETF? The Answer May Surprise You”
  1. Great HAO performance, but wouldn’t FCHI be a more meaningful comparison???

  2. Jim Trippon says:

    FCHI would be a relevant comparison to FXI when comparing large-cap vs. large-cap ETFs. Our thesis is that Chinese small-caps will outperform large-caps in the near-term. The comparison of HAO vs. FXI was not intended to attack or degrade the efficacy of FXI, but rather to highlight the fact that HAO is a stout performer that some investors may not know about, whereas most investors are already aware of FXI.
    Thanks for reading!
    Jim Trippon
    ETF Profit Report

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