ETF Spotlight: Chinese Small-Caps

November 7th at 8:17am by Tom Lydon

ETF Spotlight on Guggenheim China Small Cap ETF (NYSEArca: HAO), part of an ongoing series.

Assets: $222.4 million.

Objective: The Guggenheim China Small Cap Fund tries to reflect the performance of the AlphaShares China Small Cap Index, which tracks publicly-traded mainland China-based small-cap companies through American depositary receipts, American depositary shares, global depositary receipts and international depositary receipts listed.

Holdings: Top holdings include Great Wall Motor Co. 2.3%, Shimao Property Holdings 1.8%, Sino-Ocean Land Holdings 1.8%, Longfor Properties 1.7% and GuangDong Investment 1.5%.

What You Should Know:

  • Guggenheim Investments sponsors the fund.
  • HAO has a 0.70% expense ratio.
  • The fund has 225 holdings and the top ten make up 15.7% of the overall portfolio.
  • Regional allocations include China 68.4%, Hong Kong 30.9% and Singapore 0.7%.
  • Sector allocations include: industrials 24.6%, financials 18.6%, materials 12.4%, consumer discretionary 12.2%, consumer staples 8.8%, information technology 6.0%, utilities 4.8%, health care 4.6%, energy 1.2% and telecom services 1.0%.
  • HAO is up 8.9% over the past month, up 16.4% over the last three months and up 15.8% year-to-date.
  • The ETF is 7.4% above its 200-day exponential moving average.
  • “This fund provides good exposure to sectors leveraged to growth in domestic consumption, relative to a broad market China exchange-traded funds, which tend to be dominated by state-owned enterprises in the financial and energy sectors,” according to Patricia Oey for Morningstar.
  • “The fund’s low correlation to the U.S. market makes it a good diversification tool, especially for investors with insufficient exposure to emerging markets,” Oey said. [BRIC ETFs: Investors Jump Into China and Brazil]

The Latest News:

  • Chinese stocks feel by the most in a week ahead of the country’s leadership congress and U.S. elections, Bloomberg reports.
  • “Investors are cautious ahead of the congressional meeting and U.S. voting,” Hao Hong, managing director of research at Bank of Communications, said in the article. “Typically, the Chinese market tends to underperform before the meeting.”
  • “The leadership change is dragging on investor sentiment,” Gavin Parry, managing director of Hong Kong- based Parry International Trading Ltd., said in the Bloomberg report. “You’ve got a couple of things going on. There is speculation that more hardline conservatives could slow down the reformist agenda. There is also a feeling that not much in the way of stimulus measures will get announced from now through the next few months as the new leadership settles in. That’s finally beginning to sink into investors’ minds, the closer we get to the start of the congress.”

Guggenheim China Small Cap ETF

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

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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