GXC’s weight to that sector is 31.2% compared to 56.5% for FXI. As Mazza noted, GXC is overweight technology stocks compared to rival funds. The ETF’s weight to that sector is 19.4%, 1,100 basis points higher than FXI’s tech exposure, according to State Street data.
GXC’s “outperformance is driven by the construction of its index, the S&P China BMI. The index provides exposure to a broad array of Chinese stocks, including Chinese stocks listed on international stock exchanges (aka “N-shares”). N-shares comprise some of the most well-known Chinese companies such as Baidu (NasdaqGS: BIDU) and Ctrip.com (NasdaqGS: CTRP),” says Mazza.
Those two stocks surged earlier this week on speculation a unit of Baidu could acquire Ctrip, the Priceline (NasdaqGS: PCLN) of China.
Despite its ample technology sector exposure, GXC fits the bill as an inexpensive avenue to already discounted Chinese stocks. The ETF has a P/E ratio of just 9.69 and a price-to-book ratio of just 1.51, which represents a substantial discount the five-year average book value on Chinese stocks.
“Chinese equities have attractive long-term fundamentals and relative valuations that are currently trading at a 40% discount to non-Asian developed markets, which may make them an opportunity in the short-term,” added Mazza.
SPDR S&P China ETF
