Time For Chinese ETFs Again?

January 20, 2012


Chinese ETFs - 2012

Sure, a couple weeks trading is nothing to hang your hat on, but the early returns are positive.

Guggenheim’s HAO was last year’s biggest loser among Chinese market-cap funds, and this year it’s leading the pack.

For investors entrenched in their belief that 2011 was merely a bump in the road for Chinese equities, HAO may turn out to be their golden goose. After all, the fund is a high-risk bet on an economy that in many ways is a high-risk bet on global economic growth.

For investors in FXI, the early part of 2012 has treated them nearly as well, without the additional risks associated with HAO’s small-cap portfolio.

So far, FXI has given investors more for bang for the buck on a risk-adjusted basis, but that’s likely an anomaly, as over the course of a full trading year, HAO’s higher beta should provide returns that are more in line with its risk profile should the Chinese market really turn in a banner year in 2012.

We may have a long way to go in 2012, but the writing may be on the wall, or better yet, the on Great Wall. Whether it means Chinese ETFs are once again a “must-own” for portfolio managers remains to be seen.

But, if you believe what the market has told you so far, the only choice you have to make is how aggressively you want to jump in. Whether you choose to do so with both feet or wade in, the array of Chinese ETFs gives you a number of ways to proceed.


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