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New China ETF Tracking Growth Sectors

Matthew McCall

Investors will now have access to an ETF that encompasses one of the world’s fastest growing economies through the securities of the companies driving it.

ChinaAMC SME-ChiNEXT ETF (NYSE: CNXT) follows the 100 largest and most liquid stocks listed on China's SME and ChiNEXT boards of the Shenzhen stock exchange.

Allocated throughout nine different sectors, the fund's largest holdings are in the information technology (23.4 percent), consumer discretionary (20.6 percent) and industrial (16.9 percent) sectors. Health care also has a double-digit allocation.

Director and portfolio manager of China Asset Management Limited, David Lai had this to say about the health care sector in China: “I believe the health care sector will enjoy very significant growth in the next few years' time. China has a very young population of 1.3 billion. However, it is aging very rapidly due to the one child policy implemented 30 years ago.”

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This unique fund offers exposure to privately owned small- and medium-sized enterprises (SMEs), many of which have had a lot to do with the rapid technological innovation and economic growth in China over the last few years.

The SME’s are the work horse behind China’s booming economy, contributing an eye popping 60 percent of China's GDP and 80 percent of its employment. Many of the stocks in the CXNT portfolio are considered “new economy” sectors in China, with high potential for growth.

CNXT began trading on July 24 and is now up more than 11 percent in less than one month. In the same time frame the heavily owned iShares China Large-Cap ETF (NYSE: FXI) is only up 3 percent. With a nominal GDP growth of 9.5 percent in 2013 and the largest labor force in the world, the SME’s in China should continue to experience large growth in the years ahead.

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