An uptick in domestic demand and a resurgence of Chinese-listed A-shares has put China’s growth back in the spotlight. Exchange traded funds are a great way to gain targeted or broad-based exposure to China.
“Indeed, the evidence is pointing to a winning hand for investors in Chinese equities. Not only is GDP finally trending upward, but leaders have more boldly expressed a willingness to employ monetary/fiscal stimulus to support a 7.5% growth rate. (They’re likely to see north of 8% without stimulative measures.) And with a variety of benchmark indexes offering forward P/Es of 9 to 10, stocks tied to China look better than they have in years,” Gary Gordon wrote for Seeking Alpha.
The Chinese government’s new 5-year plan highlights a focus on increasing domestic demand in China so that the country will not rely so much on the export market. For this reason, analysts say the consumer space looks attractive. Furthermore, A-shares targeted on mainland China have gained momentum since the Shanghai Composite Index hit a four-year low last month, reports Dennis Hudachek for Index Universe.
The largest China-focused ETFs, the iShares FTSE China 25 Index Fund (NYSEArca: FXI) gives zero exposure to the consumer sector while the SPDR S&P China ETF (NYSEArca: GXC) gives about 11% to this area of the Chinese market. [China Data Strengthens – Time to Get Back into ETFs?]
Gary Gordon points out that the volatility that Chinese stocks have displayed are a result of following the growth rate of the economy too closely, rather than following the direction, or trend, of economic activity. [The Case for China ETFs]