Niche China ETFs Outperforming Giants

April 12, 2017

Guggenheim China Real Estate ETF (TAO) is up 22% year-to-date

TAO is a single-sector fund that tracks a market-cap-weighted index of Chinese and Hong Kong real estate companies and REITs. The fund tilts heavily toward Hong Kong companies, which represent some 80% of its 58 holdings.

With $37 million in assets, TAO trades with relatively wide spreads, averaging 0.24% and daily volume of about $445,000, on average. The fund costs 0.70% in expense ratio. 

WisdomTree China ex-State-Owned Enterprises Fund (CXSE) is up 20% year-to-date

CXSE is an environmental, social and governance fund that looks to offer broad exposure to China’s equity market, but with a “principles-based” selection criteria that looks to own only Chinese companies that have less than 20% of government ownership. The idea here is that nonstate-owned firms are more efficient and deliver better outcomes to shareholders.

The stocks in the portfolio are weighted by market capitalization.

CXSE is still relatively small, with only $8.6 million in assets, and it struggles with liquidity. Average trading spreads here are 1.48%, making it costly for investors to get in and out. The 71-holding ETF comes with an expense ratio of 0.53%. 

Guggenheim China Technology ETF (CQQQ) is up 18.7% year-to-date

CQQQ is a single-sector China ETF that is organized around market capitalization. The fund owns Chinese tech stocks and it’s pretty broad in scope, owning everything from software names to renewable energy firms to office equipment companies.

With 69 holdings, CQQQ is increasingly popular, as China’s technology sector benefits from consumer trends, a quickly growing e-commerce market and innovation. The fund has $67 million in assets, and it costs 0.70% in expense ratio. 


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