The Chinese economy slowed down in 2012 in the wake of a
global economic crisis. S than expected recovery in the U.S. and
the Euro-zone crisis impacted the Chinese exports. Additionally,
a lower GDP growth rate and a higher inflation level added to
China's economic woes. (
Is This the Start of China's Hard Landing?
Thanks to the government stimulus and other reforms that
supported the domestic consumption, China could at the end
avoid a hard landing. China is attracting investor attention once
more on the back of a rebounding economy. After seven straight
quarters of disappointment, the GDP growth rate climbed
recently and is expected to end the year at 7.5% or more.
With weak exports, China's focus has shifted to self
sustaining growth through domestic consumption. To bring a
transformation in economic development, which is more dependent
on exports, the country is looking to give its domestic demand a
shot in the arm. (
Do ETFs Suggest that the China Panic is Over?
The Chinese economy has seen a radical change in its growth
pattern in which consumption now plays a vital role in GDP growth
replacing investment which was once the biggest contributor. When
it comes to China ETF investing, most investors look for the
iShares FTSE China 25 Index Fund (
Forget FXI: Try These Three China ETFs
). But with China shifting its importance to domestic demand for
economic growth, investors may opt to look for other options.
Investors looking to capture this shift in an ETF form can
look to invest in small cap ETFs of China. Below we have briefly
highlighted three small cap ETFs of China, namely, HAO, ECNS and
Guggenhiem China Small Cap ETF (
To gain access to smaller and faster growing companies of
China, investors can look to invest in Guggenhiem China Small Cap
ETF (HAO). This fund specifically provides exposure to sectors
that benefit from growth in domestic consumption. (
China Small Cap ETFs Holding Their Ground
The fund provides exposure to a large basket of 226 small cap
stocks of China and has a diversified approach to investment as
just 10.5% of the asset base is invested in the top ten
Regional allocation has the highest weighting with 71.1% asset
investment in China. Hong Kong also gets a double-digit
allocation. Singapore gets a very small portion of the asset
Among sectors, Industrials, Financials, Consumer Discretionary
and Materials play a dominant role in the fund's performance. The
fund charges a fee of 70 basis points annually.
iShares MSCI China Small Cap Index Fund (
For a broader play in the small cap ETF space, iShares MSCI
China Small Cap Index Fund (ECNS) makes a good choice. ECNS is
home to 338 small cap stocks and manages an asset base of $17.6
China Small Cap ETFs Head-to-Head: HAO vs.
ECNS provides a very spread out exposure in terms of both
individual and sector holdings. The fund has just 12.7% of asset
base invested in the top ten holdings. For sector holdings, the
highest weighting goes towards Industrials and Consumer
Discretionary stocks while Financials, Materials and Information
Technology stocks also get double-digit allocation in the
The fund charges a fee of 59 basis points annually and has
generated a yield of 2.25% in the process.
iShares MSCI Hong Kong Small Cap Index (
EWHS tracks the MSCI Hong Kong Small Cap Index. The index
measures the performance of the bottom 15% companies in terms of
market capitalization in the Hong Kong equity market. (
Hong Kong ETF Investing 101
EWHS is home to 80 stocks and is highly concentrated in the
top ten holdings. More than 50% of the asset base is allocated to
the top 10. In terms of sector holdings, it is largely dependent
on the Consumer Discretionary sector, with more than 40% of the
pie. Financials, Information Technology and Industrials are some
of the other sectors with double-digit allocation.
The fund charges a fee of 59 basis points and has delivered a
return of 13.85% since its inception in January.
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ISHARS-MS CH SC (ECNS): ETF Research Reports
ISHARS-MS HK SC (EWHS): ETF Research Reports
GUGG-CHINA SC (HAO): ETF Research Reports
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