We have seen some evidence of bottom fishing in the largest China based equity ETF, FXI (iShares FTSE China 25 Index, Expense Ratio 0.72%) via options linked to the ETF, and this gives us good reason to examine the space in further detail.
FXI has lagged severely year to date in terms of performance, and China has greatly weighed on the overall returns of broad based Emerging Markets funds such as EEM (iShares MSCI Emerging Markets, Expense Ratio 0.69%) and VWO (Vanguard Emerging Markets, Expense Ratio 0.18%) where it has a substantially heavy weighting (18.67% of EEM and 18.80% of VWO).
Additionally, FXI has lost more than $1.8 billion in assets under management via redemption activity thus far in 2013 (total AUM is $5.9 billion currently).
Two China based funds have bucked the trend of weakness that has prevailed mainly across larger cap Chinese equities (particularly those in the Financial and Communication Services sectors), and have actually registered impressively positive returns thus far in 2013. PGJ (PowerShares Golden Dragon China Portfolio, Expense Ratio 0.60%) leads the way, and the fund remains rather small with $188 million in assets under management despite debuting back in 2004.
From a portfolio composition standpoint, the fund has a much different make-up than say FXI, as the heaviest sector weighting is devoted to Technology (46.48%), followed by Health Care (10.52%).
Notable Chinese tech names including NTES, BIDU, SINA, and SOHU are among the top ten holdings in the fund for example. [China ETFs Weak on Credit Jitters]
Another China based equity ETFs that have shown some green in terms of performance thus far in 2013 is ECNS (iShares MSCI China Small Cap Index, Expense Ratio 0.60%), which is tiny as well compared to FXI (ECNS has only $35 million in AUM and averages about 15,000 shares traded daily). ECNS has its heaviest sector exposure to Industrials (18.13%), followed by Consumer Discretionary (18.04%) and Technology (15.64%).
PowerShares Golden Dragon China Portfolio
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- Expense Ratio