Still, the performance is disappointing considering that the Shanghai Composite jumped 5.6% last month. FXI’s May declines underscore the risks of the ETF’s 26-stock lineup, which consists mostly large-caps and state run mega-cap companies. More diverse plays on China such as the SPDR S&P China ETF (NYSEArca: GXC) and the iShares MSCI China Index Fund (NYSEArca: MCHI) outperformed FXI in May. GXC holds 221 stocks while MCHI is home to140 [Comparing Two China ETFs]
Compelling valuations may be the source of allure for FXI and other China ETFs in the back half of this year. The Shanghai Composite trades at 9.4 times 12-month estimated earnings, compared with a seven-year average of 15.5 times, reports Weiyi Lim for Bloomberg.
FXI trades at a discount to the broader emerging markets universe as measured by the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM). FXI has a P/E ratio of 13.57 and a price-to-book ratio of 2.05 while EEM has a P/E of 18.04 and a price-to-book just over three, according to iShares data.
iShares FTSE China 25 Index Fund
ETF Trends editorial team contributed to this report. Tom Lydon’s clients own shares of EEM.