Head-to-Head: FXI Versus CHIL

China equities have been attracting a lot of investor attention lately. The market is expected to keep benefiting from policy easing and ebbing trade tensions with the United States (read: Why These Chinese Sector ETFs Are Crushing S&P 500 in 2019).

The government cut value-added tax (VAT) for the manufacturing sector to 13% from 16%, and for the transport and construction sectors to 9% from 10%. The government also announced slashes in social security fees paid by companies to 16%.

China’s all-important and long-ailing manufacturing sector is showing signs of improvement.  MSCI is allowing investors greater access to the world’s second-largest stock market — China. MSCI will be quadrupling the weight of domestically-traded Chinese stocks in its global indexes from 5% to 20% starting May. Exposure will be raised in three phases — to 10% in May, 15% in August and finally 20% in November (read: China A-Shares ETFs to Roar Higher on MSCI Move).

Against this backdrop, investors may want to know what the investment options are in the large-cap China ETF segment. While there is the more-than-a-decade old iShares China Large-Cap ETF FXI, we also have a newbie called Global X MSCI China Large-Cap 50 ETF CHIL since last December. Let’s delve a little deeper.

FXI in Focus

The underlying FTSE China 50 Index tracks the performance of the largest companies in the Chinese equity market that are available to international investors. The fund holds 50 stocks in the portfolio. It charges 74 bps in fees.

Tencent Holdings (9.49%), China Construction Bank Corp H (8.5%) and Ping An Insurance (Group) Co Of China (6.7%) are the top three holdings of the fund.  The fund is heavy on financials (45.5%) followed by Communication (19.5%), energy (10.9%) and real estate (9.7%). Since it has entered the market, FXI has attracted about $6.5 billion in assets.

CHIL in Focus

The underlying MSCI China Top 50 Select Index select the 50 largest equity securities, by free-float market capitalization, of the eligible China equity universe. The Index incorporates all eligible securities per MSCI’s Global Investable Market Index Methodology, including China A, B and H shares, Red chips, P chips and foreign listings, among others.

This fund also has 50 stocks in its portfolio. It charges 29 bps in fees. Like FXI, this fund is heavy on financials but its exposure is less in comparison to FXI. CHIL puts about 31.4% focus on financial stocks. Interactive Media & Services (14.5%) and Internet & Direct Marketing Retail (11.4%) get the next two spots. Like FXI, this fund is heavy on Tencent (10.2%), followed by Alibaba (8.6%) and China Construction bank (7.2%). Since it entered the market in December 2018, the fund has amassed about $3 million in assets.

Bottom Line

FXI is hugely popular, as is evident from its AUM. However, CHIL may be more appealing to investors owing to its cheaper expense ratio. Exposure-wise, both are same though CHIL is not as finance-oriented as FXI. Notably, the fund FXI has shed about $111.9 million in assets this year.

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iShares China Large-Cap ETF (FXI): ETF Research Reports
Global X MSCI China Large-Cap 50 ETF (CHIL): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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