China Real Estate ETF Plunge Revives Bubble Fears

September 14th at 4:23pm by Tom Lydon

An exchange traded fund tracking real estate stocks in China and Hong Kong fell 3% on Wednesday and recorded a new 52-week low. The ETF’s roughly 20% loss so far this year is a sign China’s property bubble is bursting.

ETF Spotlight on Guggenheim China Real Estate ETF (NYSEArca: TAO), part of an ongoing series.

Assets: $27 million.

Objective: The Guggenheim China Real Estate fund tries to reflect the performance of the AlphaShares China Real Estate Index, which holds publicly-traded companies and real estate investment trusts (REITs) that generate a majority of their revenues from real estate development, management and/or ownership of property in China, Hong Kong and Macau.

Holdings: Top holdings include The Link REIT 6.91%, China Overseas Land & Inv 5.91%, Cheung Kong Holdings Ltd 5.15%, Wharf Holdings Ltd 5.15% and Henderson Land Development 5.13%.

What You Should Know:

  • Guggenheim Funds is the provider of the Chinese real estate ETF.
  • TAO has an expense ratio of 0.65%.
  • The fund is down 7.42% over the past month, 12.34% in the last three months and 17.35% year-to-date.
  • The fund holds 99.44% in the financials sector and 0.56% in the industrials sector.
  • Hong Kong makes up 72.29% of the fund and China is 27.71%.
  • TAO has 47 holdings.

The Latest News:

  • The ETF has experienced a sharp decline lately, which may be in response to a possible correction in China’s real estate market.
  • Billionaire property tycoon Vincent Lo, chairman of Shui On Land Ltd, believes the government is pushing banks to curb loans to real estate companies as a way to slow development and cool the housing market, reports Robyn Meredith for Bloomberg.
  • “We believe maybe the market is going to go through a tough time for another 12 to 18 months, and then I think it’s a good time to go and buy something,” Lo commented.
  • Lo, though, is still bullish on China’s residential and commercial property markets for the long term as more people move to cities.
  • “After years of housing prices gone wild, China’s property bubble is starting to deflate,” begins a Wall Street Journal story from the summer.

For past stories in this series, visit our ETF Spotlight category.

Guggenheim China Real Estate ETF

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.

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