Claymore ETF Captures China Tech Sector

By
Heather Bell
December 08, 2009
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Claymore Securities today launched its fourth exchange-traded fund focused on
China
’s equities markets, with the rollout of the Claymore China Technology ETF (NYSEArca: CQQQ).

The ETF is the first to specifically focus on
China
’s burgeoning technology sector. Claymore Securities President Christian Magoon describes
China
as a major player in the technology space.

“When you look at
China
and their technology space, they’re very dynamic, they’re leaders in a lot of the new technology being developed,” said Magoon. He noted
China
’s involvement in the areas of alternative energy, Internet applications, software and computers, in particular.

“In addition, they have the X factor: The Chinese consumer is coming of age, and the middle class standard of living is increasing. And that’s leading to more and more technology purchases. When you look at who dominates the technology space in
China, it’s Chinese companies, not companies from overseas. So Chinese really benefit from this new consumer demand that’s emerging in
China
,” Magoon added.

And the potential for growth appears to be explosive.
China
’s rapid continued industrialization means that more and more of its citizens are flocking to its cities and a higher-tech way of life.

Magoon notes that while 82 percent of urban Chinese own cell phones, the statistic is at just 49 percent for rural Chinese. He cites a similar statistic on computers: 33 percent of urban Chinese citizens own computers, but that number drops to just 4 percent for the rural population.

Dearth Of China Tech ETFs

Magoon also points out that not only are there no existing ETFs focused on China’s technology sector, but that currently listed international technology ETFs provide little to no exposure to China.

CQQQ’s underlying index covers companies classified as “Information Technology” by the Global Industry Classification Standard used by Standard & Poor’s that are also domiciled in mainland China, or in Hong Kong or Macau.

The index, however, requires that Hong Kong- and Macau-based companies must generate most of their revenue through business activities in
China
or its special administrative regions. A recent component list shows Tencent Holdings, Baidu.com, NetEase.com, Byd Co. and Alibaba.com Ltd. among the top components of CQQQ’s underlying index.

All of Claymore’s funds focused on China track indexes from AlphaShares, an index provider that offers a growing family of benchmarks tied to
China
’s markets. Burton Malkiel is one of its co-founders and its chief investment officer.

CQQQ is part of a suite of China-focused ETFs offered by Claymore that also includes the Claymore/AlphaShares China All-Cap ETF (NYSEArca:
YAO
), Claymore/AlphaShares China Small-Cap ETF (NYSEArca: HAO) and Claymore/AlphaShares China Real Estate ETF (NYSEArca: TAO). The three existing ETFs have more than $500 million in combined assets.

In addition to those funds and CQQQ, Claymore also has two more ETFs in registration that target
China
’s infrastructure and consumer-related sectors.

“We view investing in
China
as one of the great opportunities over the next century, so our plans are to have a robust suite of products geared to the Chinese market,” said Magoon.

CQQQ is expected to charge an expense ratio of 70 basis points.

 

ETF DAILY DATA

'SPY' lost $2.48 billion on Wednesday, Jan. 28, as net outflows and a lower stock market pulled total U.S.-listed ETF assets below $2 trillion.

'SPY' paced SSgA's issuer-leading outflows on Wednesday, Jan. 28, as net outflows and falling stocks pulled total U.S.-listed ETF below $2 trillion.

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