Although the Chinese economy was weak earlier in the year, there
is some hope that the country can end 2013 on a solid note. This
could be especially true in the consumer market, as this corner of
the Chinese economy seems very well-positioned for further growth
in the months ahead.
Investors should note that consumer demand in China is shooting up
as rural inhabitants are shifting to urban areas of China. In fact,
by 2020, it is expected that approximately
850 million citizens
will be residing in urban area of China.
It emphasizes the fact that with improved lifestyle there will be
more demand for consumer goods. The growth will eventually result
in products readily available to consumers at much cheaper prices.
It should be noted that, at present, China is growing more on
domestic consumption and less on exports, so this could be the
sector to watch in the years ahead (read
The Right and Wrong Ways to Invest in China
In fact, China has emerged as the biggest developing market for
consumer products. Moreover, China has turned out to be the world's
largest market for luxury items and cars. This has consequently
resulted in foreign investment in the consumer space thereby
providing further boost to the sector.
Additionally, China has emerged as a strong market for Apple
products. Higher sales of iPhones and laptops also signifies goods
prospects for gadget companies.
Indeed, the smart phone market of China is gearing up at a fast
speed. Sales have doubled to the extent that one-third of all smart
phones are being sold in China. This sales figure is much higher
than the United States, India, Japan and the United Kingdom sales
Given this bullish trend, a look at some of the top ranked ETFs in
the space could be a good way to target the best of the region with
lower levels of risk.
Investors looking to tap this region in basket form can invest in
Global X China Consumer ETF (
which is a Zacks ETF Rank #2 (Buy) fund. We expect it to outperform
its peers over the next year. Thanks to this, the product could be
worth a closer look by investors seeking exposure to this corner of
the China economy.
About the Zacks ETF Rank
The Zacks ETF Rank provides a recommendation for the ETF in the
context of our outlook for the underlying industry, sector, style
box or asset class (read:
Zacks ETF Rank
). Our proprietary methodology also takes into account the risk
preferences of investors. ETFs are ranked on a scale of 1 (Strong
Buy) to 5 (Strong Sell) while they also receive one of three risk
ratings, namely Low, Medium or High.
The aim of our models is to select the best ETFs within each risk
category. We assign each ETF one of the five ranks within each risk
bucket. Thus, the Zacks ETF Rank reflects the expected return of an
ETF relative to other products with a similar level of risk.
For investors seeking to apply this methodology to their portfolio
in the China consumer sector, we have taken a closer look at the
top ranked CHIQ. This ETF has a Zacks ETF Rank of 2 or 'Buy' (
the full list of top ranked ETFs
) and is detailed below.
Global X China Consumer ETF (CHIQ)
Launched in November of 2009, Global X China Consumer ETF seeks to
provide investment results that correspond generally to the price
and yield performance, before fees and expenses, of the Solactive
China Consumer Index.
The Solactive China Consumer Index is designed to reflect the
performance of the consumer sector in China. It is comprised of
selected companies which have their main business operations in the
It is a passively managed exchange traded fund (ETF) designed to
provide aggressive exposure in the consumer sector of the China
Since its inception, the ETF has amassed $169.9 million in assets,
making it a reasonably popular choice for investors. However, CHIQ
is not a cost-effective choice for investors as it charges 65 basis
points per annum in fees and expenses compared to a category
average of 0.54% (see
Focus on These China ETFs for Outperformance
The fund currently holds a fairly small portfolio of 39 securities
in total, and allocates 51.04% of the total assets to its top 10
Great Wall Motor Co. (6.65%), China Menguin Dairy Co. (6.50%) and
Melco PBL Ent ADR (5.82%) are the top three holdings.
CHIQ struggled earlier in the year, but has come back strong
lately, pushing the fund to a gain in YTD terms. The fund recorded
a gain of 1.6% in the year-to date period while it has delivered a
return of 14% over a period of one year.
We believe that the momentum can continue, and that CHIQ can surge
to the top in the consumer ETF space. This could be especially
true if China continues to rebound, making this ETF an intriguing
way to play the resurgent nation and one of its most dynamic
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GLBL-X CHIN CON (CHIQ): ETF Research Reports
ISHARS-CHINA LC (FXI): ETF Research Reports
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