China's main stock market index, the Shanghai Composite,
finished 2013 with a modest loss of seven percent.
The country has averted a hard landing for a couple years, but
the stock market has been lagging the other top economies in the
Despite the strong growth out of China, investors continue to
doubt if the country and keep up seven-plus percent growth in the
The largest Chinese ETF by assets under management is the
iShares FTSE China Large-Cap ETF (NYSE:
). With a total of $5.7 billion of assets in the ETF, it is head
and shoulders above its competition. However, its performance in
2013, a loss of 5 percent, was subpar and lagged its peers.
Fiat Positioning Itself For A Promising Market
Share In China
The ETF has a narrow focus with only 25 stocks in the
portfolio and over 55 percent in Chinese financial stocks. The
reason the financials make up such a large portion of the ETF is
that the goal of the underlying index is to track the 25 largest
and most liquid stocks available to international investors. The
financials fall into this category.
On the other side of the spectrum is the PowerShares Golden
Dragon China ETF (NYSE:
) with $329 million in assets under management. The ETF was a
huge winner in 2013 with a gain of 58 percent. There are a total
of 72 Chinese companies in PGJ, which lowers the concentration,
however the big difference is the names of the top holdings.
When comparing the top ten holdings of the two ETFs, only one
company is present in both portfolios. China Mobile (NYSE:
) is the number three holding in FXI with a allocation of 8.2
percent and it is the eighth largest holding in PGJ, making up
3.5 percent. CHL lost 11 percent in 2013, helping FXI lag
The majority of the stocks that make up the top holdings in
PGJ are technology related. Several of the top ten holdings are
either at or near multi-year highs as the technology sector in
China continues to outperform. The top holding, Baidu (NASDAQ:
), was up 77 percent in 2013 and was a major reason the ETF was
able to post the strong gain.
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Falling in the middle is the $862 million SPDR S&P China
) that gained five percent last year. The ETF has 31 percent in
the financials and 20 percent in technology. The top holdings are
not made up of the tech names similar to PGJ, but it also is not
as reliant on the financial stocks. Looking ahead, GXC will
likely fall in the middle between the two prior ETFs based on
performance because of its more diversified approach.
When it comes to investing in China via ETFs an investor
should beware of the many options and how the outcome can be
greatly affected by which ETF is chosen.
(c) 2014 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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