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ETF Spotlight: China


Emerging market volatility has swayed investors to look elsewhere for returns, however, valuations are looking cheap for focused exchange traded funds. Investment in the iShares FTSE China 25 Index (FXI) is a low-cost, effective way to gain exposure to the second largest economy in the world.

Over the past three years, GDP growth in China has posted around 10%, reports Augusto Fontevecchia for Forbes. After the U.S. unveiled that there will be another round of quantitative easing, analysts are certain China will announce a stimulus to compete. After all, central bankers around the world have been doing everything they can to support or ignite growth. [Comparing Two ETFs for China]

“Stimulus, they suggest, is warranted. And indeed it has been announced. In order to stabilize GDP growth, the NDRC (Beijing’s planning agency) have approved a slew of highway and subway projects, along with power stations, wind farms, airports and other things, worth an estimated $158 billion, or 2.1% GDP growth,” Fontevecchia wrote. [Domestic Consumption Slowdown Hits China]

SPDR S&P China ETF (GXC) and Powershares Golden Dragon Halter USX China Portfolio ETF (PGJ) are among the other ETFs indexed to China. WisdomTree China Dividend ex-Financials Fund (CHXF) is another interesting option that recently launched.

Barclays analysts warn that investors should not expect a huge spark in growth output in China. Reasons are because GDP growth is still over 7.5%, the jobs market is stable and inflationary pressure is looming. Inflation may be a more important issue for leaders to address rather than growth.

So far, FXI has lost 3.2% in 2012. Chinese equities are struggling with major companies in the red. For the near future, China’s leadership plans on reducing exposure to foreign demand, while increasing domestic consumption. [Best Emerging Market ETFs]

China is a member of the so-called BRIC countries along with Brazil, Russia and India. [BRICs VS. Emerging Market ETFs]

BRIC ETFs such as the Guggenheim BRIC ETF (EEB) and the iShares MSCI BRIC Index Fund (BKF) have had lagging performance this year.

iShares FTSE China 25 Index



Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.