In 2014, the average return on equity for SME-Chinext 100 member firms was nearly 500 basis points higher than that of CSI 500 equivalents.
Although much has been made of the struggles of select Chinese Internet stocks, namely Alibaba (NYSE: BABA), the technology and consumer discretionary sectors have been important drivers of CNXT’s strong 2015 showing. Those sectors have combined to drive over a third of CNXT’s year-to-date gain, according to Morningstar data. The ETF allocates a combined 48.7% of its weight to technology and discretionary names. [Consider These New China ETFs]
A-shares equities have become pricier than their Hong Kong-listed counterparts, a trait reflected by CNXT’s 40.6 trailing P/E. What investors are paying up is as important as knowing that they are paying up in the first place. With small-caps, that means growth and A-shares small-caps deliver that. SMEs in China currently contribute 50% of national tax revenue, 60% of GDP, 74% of technical innovation, and 80% of employment, according to Market Vectors data.
Market Vectors ChinaAMC SME-ChiNext ETF