Best Performing ETFs At Midyear 2015

July 01, 2015

ETFs focused on Chinese equities, particularly those investing in mainland stocks, delivered the biggest returns in the first half of the year. The strong performance was largely tied to a reform-minded government that has shown itself committed to do whatever it takes to grow and open up the stock market.  

 

This pro-reform leadership has "walked the walk" and "talked the talk," as Brendan Ahern, head of KraneShares, recently put it, implementing change that includes having state-owned enterprises be more efficient; allowing private investors in; spinning off noncore businesses, etc.

 

Top Gainers Have Been Falling

The Market Vectors ChinaAMC SME-ChiNext ETF (CNXT | D-49) and the Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap ETF (ASHS | D-73) each gained upward of 61 percent in the last six months. These gains at the end of June even reflect a 20-percent-plus technical correction Chinese stocks faced in the second half of the month—at one point CNXT was up more than 100 percent this year.

 

2015 Half-Year Top Performers (%) ex-Leveraged & Inverse

Ticker Fund TRR Flows AUM ($M)
CNXT  Market Vectors ChinaAMC SME-ChiNext 64.73 16.23 50.81
ASHS  Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap ETF 61.12 31.58 75.56
SBIO  ALPS Medical Breakthroughs ETF 43.04 105.99 122.42
XBI  SPDR S&P Biotech 35.66 653.21 2,712.63
BBP  BioShares Biotechnology Products 34.34 16.29 21.03
BBC  BioShares Biotechnology Clinical Trials 30.57 25.27 30.78
ECNS  iShares MSCI China Small-Cap 29.29 9.39 49.51
RODI  Barclays Return on Disability ETNs 26.16 -   27.61
KBA  KraneShares Bosera MSCI China A Share 25.99 0.20 29.58
PEK Market Vectors ChinaAMC A-Share 25.27 15.32 133.59

 

 

CNXT targets 100 of the largest stocks listed on Shenzhen's SME and ChiNext Boards, which cater to smaller- and medium-size companies. ASHS tracks an index of 500 Chinese small-cap companies listed on the Shanghai and Shenzhen stock exchanges.

 

"Beijing is pursuing sweeping economic reforms with the intent of establishing a greater role for market forces and less direct management of the economy by organs of the state," Tyler Mordy, of Hahn Investment Stewards, recently told us. "To smooth the process, a stock market boom is crucial—both to enable the further privatization of state-owned enterprises and to encourage private investment."

 

"The golden rule of China investing is to monitor what the central government wants. And what it wants now is a healthier market with greater liquidity and depth," he added.

 

Biotech Posts Healthy Returns

Also among the best-performing ETFs in the first half of the year was a roster of biotech-focused ETFs. The biggest of them, the $2.4 billion SPDR S&P Biotech (XBI | A-77), saw returns of 35 percent in six months.

 

These funds—tapping into one of the hottest health care segments—have benefited from several factors including the Affordable Care Act, the so-called Obamacare legislation. The legislation has created an influx of new patients that health care companies have seen come into the fold. Adding to performance has been a wave of mergers and acquisitions, and ever-pressing demand for new drug development in the face of global scares such as Ebola.

 

Health care, as a sector, was one of only three S&P 500 sectors to rally in the first half of the year, and the best-performing at that, with gains of 8.8 percent. In all, the S&P 500 ended June with gains of only 20 basis points in 2015.

 

 

 

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