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Claymore ETF Captures China Tech Sector

Related ETFs: HAO | TAO
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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.

 

 

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