Over the past 10 years, China has been one of the best performing emerging markets, leaving investors wondering if this can sustain. Chinese shares and exchange traded funds still have a role within investors’ portfolios, due to the nation’s status as the second largest economy in the world.
“Over the past decade, China has steadily grown its gross domestic product 9% or 10% annually, even through the 2008 global financial crisis. Many are now questioning how sustainable this growth is, and recent statistics suggest the possibility of a recession. The slowdown in the developed world has already showed up in China’s numbers, as net exports detracted slightly from GDP growth in 2011 and will likely be an even larger drag in 2012,” Patricia Oey for Morningstar wrote in a recent ETF analysis. [Best Emerging Market ETFs]
As rating agency Moody’s reported, China is officially a “two-speed” economy. Chinese state-owned companies are weathering the global market volatility better than the smaller companies that make up China’s private sector, reports Don Dion for The Street. [China ETFs Fall on Growth Concerns]
Near-term, investors should be aware that volatility in China’s markets will be the norm. Growth projections have been cut short and the government has decided to take measures to keep real estate prices low, reports Dion. It is for this reason many analysts are certain that the mega and large cap companies run by the state are a safer bet than the small-cap focused funds.[Are China ETFs in For a Hard Landing?]
The following Chinese ETFs represent different asset classes, catering to various risk tolerances:
- iShares FTSE China 25 Index (NYSEArca: FXI) gives exposure to Chinese mega caps; very influential companies represented.
- Guggenheim China Small-Cap Index ETF (NYSEArca: HAO) Although this fund tracks smaller companies, it has still managed to out do FXI. It has returned about 14% over the same time period that FXI gained 6%. Those investors that can handle the risk would benefit from this ETF.
- PowerShares Golden Dragon Halter USX China (NYSEArca: PGJ) This fund aims at the mid-cap market and is an alternative for investors that aren’t sure of large or small caps.
- SPDR S&P China ETF (NYSEArca: GXC) Also a large cap focused fund, GXC focuses in on financials, telecom and energy.
Tisha Guerrero 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.