Chinese markets have taken a hit recently, but not all parts of the market have suffered equally. With ETFs, you can hone your focus.
With the Chinese Year of the Tiger having kicked off on Valentine’s Day, many global investors are asking themselves whether market conditions there will show their portfolios some renewed love later in the month. Most regional analysts say they will—but for ETF investors, making the right choice of fund may be critical to success.
The start of 2010 has been a rough time for equities globally, but nowhere more so than in
Despite the sell-off, Hong Kong-based Morgan Stanley
“We think 2010 growth will be high, inflation will be mild and policy exit will be moderate. For equities, this means a temporary Goldilocks bullish condition before inflation eventually bites (probably in 2011)” wrote Lou in a recent research note to the bank’s clients.
Markus Rosgen, chief strategist for Citigroup in
Two Big Choices: EWH Vs. FXI
ETF investors looking to pile into Chinese equities have a number of choices, including whether to put money into China-specific funds or to move into
Two of the biggest China-related ETFs split this difference, but their performance year-to-date has been remarkably different. The iShares FTSE/Xinhua China 25 Index Fund (NYSEArca: FXI) has dropped in line with the indexes, falling about 8 percent, while the iShares MSCI
The big performance disparities are mainly the result of FXI’s dominant focus in financials. FXI is weighted a whopping 35 percent in China Construction Bank, Industrial and Commercial Bank of China, China Life Insurance, Bank of China and China Merchants Bank.
Chinese banks took the brunt of the late-January selling after renewed concerns of monetary policy tightening and after regulators forced banks to restrict their lending in the early parts of the year.
Strategists at Morgan Stanley foresee a slowing of new loan growth to the high teens in 2010 vs. around 30 percent last year, but don’t believe that will affect equity valuations unduly. Morgan Stanley also maintains that additional capital-raising by Chinese financial institutions this year is likely to be focused among the smaller players.
If that is the case, EWH’s two financial services holdings (Bank of East Asia and Hang Seng Bank) look like more precarious targets than FXI’s broad collection of Chinese megabanks.
Naturally, FXI and EWH are not the only options for investing in
PGJ’s top holdings include such volatile names as Yanzhou Coal Mining and the Aluminum Corp. of
The SPDR S&P