Emerging Markets equities continue to stagger year to date, weighed down largely by under-performance once again in Chinese equities (China makes up 19.5% of EEM (iShares MSCI Emerging Markets, Expense Ratio 0.67%), and is the single largest country component of course), and the three largest China centric ETFs are off between 10-14% already in 2014 YTD.
We are referring of course to the $5 billion FXI (iShares China Large Cap, Expense Ratio 0.73%), and the significantly smaller MCHI (iShares MSCI China, Expense Ratio 0.61%, $878 million in AUM) and GXC (SPDR S&P China, Expense Ratio 0.59%, $733 million in AUM).
These three funds all share a common thread, and that is exposure to Large Cap equity names, and the heaviest portion of the portfolio invested in Financials.
Thus, if you venture outside of funds structured like these three, you will see a few exceptions to the year to date weakness in Chinese equities, namely in ETFs PGJ (PowerShares Golden Dragon Halter USX China Portfolio, Expense Ratio 0.60%, ) which is notably Technology heavy, with a healthy 55% slug invested in that sector.
Despite some recent short term weakness, the fund is still net up a few percentage points for the year in terms of return. Tech stocks have clearly been relative leaders not only in the U.S. but in China, as Tech-centric China plays CQQQ (Guggenheim China Technology, Expense Ratio 0.70%), KWEB (KraneShares CSI China Internet, Expense Ratio 0.68%), and QQQC (Global X NASDAQ China Technology, Expense Ratio 0.65%) are all still up firmly on the year despite recent global equity weakness.
These funds remain rather small in terms of AUM, with CQQQ currently holding $88.7 million, followed by KWEB’s $78 million and QQQC’s $20 million. CQQQ and QQQC have both been around since 2009 whereas KWEB only debuted in July of 2013, making its quick raising of assets rather impressive and worth watching closely.
KraneShares CSI China Internet Fund
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.
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