China Real Estate ETF and the Housing Bubble
April 27th 2011 at 3:46pm by Tom Lydon
An uptick in the number of housing transactions across Chinese cities bodes well for the China real estate exchange traded fund (ETF). However, the optimistic news on the burgeoning Chinese housing market may force the government to clamp down even tighter on speculation.
Transaction volumes in several Chinese cities jumped last week, which support prices and signals steady demand, reports V. Phani Kumar for MarketWatch. The higher volume is generally seen as a bullish indicator for the property sector in China.
Some observers, though, see the fresh data as evidence that Beijing and provincial governments haven’t been effectively controlling for speculative activity. Sylvia Wong and Cynthia Chan, analysts at brokerage UOB Kay Hian, remark that “as sales activities continue to pick up and home prices remain stubbornly resilient, it is becoming increasingly likely that policies will be tightened further in the housing market.”
UOB Kay Hian Analysts state that property sales in 18 Chinese cities increased 26% last week from the previous week and average prices rose 0.5%. They also believe that transactions will remain high elevated in May due to new project launches. [Will Higher Rates Hit China Real Estate ETF?]
Other analysts opine that there is a high chance of further policy moves in the housing market, with J.P. Morgan commenting that banking regulators could restrict trust financing toward the property sector.
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- Guggenheim China Real Estate ETF (NYSEArca: TAO) tries to reflect the performance of the equity index AlphaShares China Real Estate Index, which monitors the performance of publicly issued common equity securities of publicly-traded companies and real estate investment trusts (REITs) that may be invested by foreigners. The fund has an expense ratio of 0.65%. The ETF weights Hong Kong at 72.84% and China at 27.16%.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.