At last count we tallied 27 exchange traded fund products that are now listed on the market that are focused on the Chinese equity and fixed income markets. To say that this segment of the ETF market has experienced “growth” is a gross understatement, as many in the industry will recall when iShares FTSE China 25 (NYSEArca: FXI - News) was the only game in town, so to speak back in 2004 when it first began trading.
FXI remains the giant in the space, garnering a lofty $6.5 billion in assets over the years, and it trades over 21 million shares per day typically. While FXI offers large cap exposure to the Chinese equity market and is generally heavily tilted towards Financials (52.90% of the index), a number of more specialized, targeted China based funds have emerged over the years.
Most will not be surprised to see that Direxion Daily China Bull 3X (NYSEArca: YINN - News) is the best performer in the China space year to date, up 46.35%, although the ETF is designed as a trading vehicle rather than along-term investment.
Developing markets turned in a stellar performance in the month of January, and we have seen impressive flows in emerging market ETFs. [Weekly ETF Recap]
Other top performers in the early going in 2012 include Guggenheim China Technology (NYSEArca: CQQQ - News) which is up 16.30%, Global X China Financials (NYSEArca: CHIX - News), Global X China Industrials (NYSEArca: CHII - News), Guggenheim China Real Estate (NYSEArca: TAO - News), Guggenheim China All Cap Fund (NYSEArca: YAO - News), iShares FTSE China Index (NYSEArca: FCHI - News) and PowerShares Golden Dragon Halter USX Chnia (NYSEArca: PGJ - News), to name a few.
Additionally, in 2011 a number of fixed income focused Chinese ETFs were launched, including RMB (Guggenheim Yuan Bond), DSU (PowerShares Chinese Yuan Dim Sumb Bond), and CHLC (Market Vectors Renminbi Bond) which offer exposure to a market that was previously inaccessible to investors and most institutions for the most part.
In addition to sector specific China equity based ETFs, one can speculate on specific “themes” in China as well, such as an infrastructure build out via CHXX (EGShares INDXX China Infrastructure) or take positions in smaller cap names in the Chinese equity market via ECNS (iShares MSCI China Small Cap) or HAO (Guggenheim China Small Cap) for example.
The bottom line is that with China having the heaviest weighting in the MSCI Emerging Markets Index currently, at 16.95%, and with the index up 13.76% year to date (but down 7.34% over the trailing one year period) and seeing tremendous asset inflows throughout the first month of this year via various ETFs, perhaps it is time for portfolio managers to sift through the greater availability of China specific investment choices in the ETF space in order to zero in on specific exposure in these markets.
EGShares INDXX China Infrastructure
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