Chinese based equities are having a hard time this morning, as we see benchmark ETF FXI (iShares China Large Cap, Expense Ratio
0.73%) trading at its lowest level since mid-August where it briefly dipped below $40 as it has this morning.
Today’s gap down notably takes the fund below its 50 day MA for the first time since May, so the weakening action should not be taken lightly. Surely the fund’s top weighting to Tencent Holdings (>10.1%) has not helped in recent sessions, as Social Media names in general have gotten slaughtered (see FB for instance in the past couple days).
From a sector standpoint, FXI is weighted most heavily to Financial Services (>43% of the portfolio), followed by Communication Services (>16.8%), Energy (>12.4%), Technology (>10.1%), and so on, so it is interesting to see a market cap weighted ETF constructed as such having its highest weighting now in Tencent, a Technology name thanks to a general trend of rising stock
prices in the Social Media sector in 2014.
China based Tencent is also notably the third largest weighting in the worth watching SOCL (Global X Social Media, Expense Ratio 0.65%), behind LNKD and FB. YANG (Direxion Daily China Bear 3X Shares, Expense Ratio 0.95%) has notably picked up trading volume in recent days and is currently bumping up against its 50 day MA for the first time since May as it attemptsa breakout.
There have not been any significant asset flows in FXI in recent sessions to indicate if bulls or bears are taking a stance, and the
fund has seen a modest $431 million flow out via redemptions year to date. Likewise, YANG has only seen a modest amount of inflows (about $1 million) hit the fund in recent days while its sister ETF YINN (Direxion Daily China Bull 3X Shares, Expense Ratio 0.95%) has seen flat flows.
Although FXI is by far the largest China equity focused ETF in the U.S. landscape with $5.91 billion in AUM, we also closely watch
MCHI (iShares MSCI China, Expense Ratio 0.61%), GXC (SPDR S&P China, Expense Ratio 0.59%), which both have over $1 billion in AUM as “benchmark” type ETFs in the space.