It is a dilemma faced by many developing nations. How do
economies keep developing without taking on a significant
pollution footprint? With that in mind, it probably is not
surprising that of the 10 most polluted places on earth
all can be found in emerging markets
Two - Linfen and Tianying - are in China. Neither of those
places is Beijing, China's capital city, where a layer of smog so
thick blanketed the city over the weekend that it essentially
became unsafe to go outdoors.
An unofficial air quality monitor on the roof of the American
Embassy in Beijing, the Air Quality Index on Saturday afternoon
hit 886. Any figure above 300 is considered "hazardous,"
Sky News reported
Still, the Shanghai Composite was up by more than three
percent at 2AM Eastern time and it was health care and technology
issues that lead the charge. Those sectors took on a leadership
role in Monday's Asian session because traders speculated that
those would be the industry groups most likely to benefit from
government efforts to stem China's inflation. If that proves to
be the case, the following
could have upside potential.
EGShares Health Care GEMS ETF (NYSE:
) The EGShares Health Care GEMS ETF is apt to put off volume
fanatics because average turnover in this fund is less than 3,800
shares per day. That has not stopped HGEM from gaining almost 28
percent in the past year, a performance that reminds investors
that while U.S.-based pharmaceuticals names are often slapped
with the "low beta" tag, that is not the case in the developing
Said another way, the Health Care Select Sector SPDR (NYSE:
) has lagged HGEM by more than 700 basis points over the past
year. HGEM devotes a little less than two-thirds of its weight to
biotechnology and pharmaceuticals names with the remainder of the
fund's weight going to health care equipment makers. Nearly 20.3
percent of HGEM's country weight is allocated to China, putting
that country behind India (31 percent) and South Africa (27.6
Guggenheim China Small Cap (NYSE:
) There has been plenty of chatter about
exactly which is the best China fund
. It probably is not fair to compare a small-cap fund like HAO to
the large- and mega-cap heavy iShares FTSE China 25 Index Fund
), but it is worth nothing that when Chinese stocks are rising,
HAO is the better bet. HAO is up 9.8 percent in the past month
while FXI is up 6.1 percent.
Combined, technology and health care names represent about 12
percent of HAO's weight, so this is not the purest play on
China's efforts to tame pollution. HAO's valuation is compelling,
though. The fund's P/E is 7.9 and it carries a price-to-book
ratio of just one,
according to Guggenheim data
. FXI's P/E ratio is nearly 14 with a price-to-book of 1.73.
Guggenheim Solar ETF (NYSE:
) A major part of the Chinese pollution problem is the country's
voracious consumption and production of coal as a fuel source.
Conversely, China has also shown a deep commitment to its solar
industry. That commitment has prompted a stunning rally in solar
stocks and ETFs in recent weeks.
Soaring solar stocks
have some doubters and detractors
, but there is no denying the fact that the Guggenheim Solar ETF
has gained almost 13 percent in the past month. Not only have
TAN's constituents been on the move higher, but so has the ETF's
assets under management total. In June 2012
TAN had just over $50 million in AUM
. As of last Friday, that number was over $60.6 million.
TAN is not a China-specific play, but China and Hong Kong
combine for almost 44 percent of the ETF's country weight.
For more on ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Gain access to more investing ideas, tools & education.
Get Started on Marketfy, the first ever curated
& verified Marketplace for everything trading.