On a strong day for emerging markets ETFs Thursday, the Guggenheim China Small-Cap ETF (NYSEArca: HAO) rose another 1.6% to a new 52-week high on more than triple the average daily volume.
Impressive performances are nothing new for HAO. The ETF is up over the past month, 90 days, past six months and year-to-date and over each of those time frames, HAO has outpaced the iShares China Large-Cap ETF (NYSEArca: FXI), the largest China ETF by assets. [China Small-Cap ETF Keeps Shining]
HAO “has shown great relative strength lately, breaking out above resistance at $25 while the S&P 500 pulled back 5% off a recent swing high. We like the bullish reversal candle that formed in $HAO last week, as it opened below the prior week’s low and closed above the prior week’s high. The price closed near the dead highs of the week as well,” said Deron Wagner of Morpheus Trading Group.
HAO’s out-performance of its large-cap rivals is in part attributable to its sector mix. Nearly 36% of HAO’s sector weight goes to consumer discretionary, technology and staples names whereas large-cap China ETFs are typically bogged down by exposure to giant state-run banks and energy firms, among others. [Two Popular ETFs With Attractive Charts]
“Small cap stocks are an excellent way to get exposure to growing segments of the economy that are often overlooked because of their relative obscurity. Many people believe that the next phase of Chinas growth will be stimulated by local consumers instead of foreign exports which are what these small cap stocks are uniquely positioned to reach. In addition, with HAO you avoid many of the mega-cap China stocks that are dominated by state-run enterprises,” said FMD Capital Management.