Amid declines in Chinese A-shares, the stocks trading on mainland China, Chinese equities and the corresponding U.S.-listed exchange traded funds have been receiving ample attention in recent weeks. Much of that attention has not been positive.
However, some analysts and investors argue the recent declines in Chinese stocks represent a buying opportunity. The Chinese economy, the second largest in the world, will still expand at a relatively high rate, albeit slightly slower than prior years. A newly reconfigured ETF could be an ideal avenue for capturing a rebound in Chinese stocks.
Earlier this month, WisdomTree (NasdaqGS: WETF), the fifth-largest U.S. issuer of exchange traded funds, said it converted the WisdomTree China Dividend Ex-Financials Fund (NasdaqGM: CHXF) to the WisdomTree China ex-State-Owned Enterprises Fund (NasdaqGM: CXSE).
The newly converted ETF tracks the WisdomTree China ex-State-Owned Enterprises Index (CHXSOE), which tracks Chinese companies that are not state-controlled. State owned enterprises are defined as government ownership of more than 20% of outstanding shares of companies, according to WisdomTree.
“What we are doing is saying ‘Own China, but don’t necessarily own the state owned companies.’ We think this is a very exciting new way to own China, and it hasn’t existed in the past,” said Christopher Gannatti, Associate Director of Research at WisdomTree, in an interview with TheStreet.com.
The newly converted ETF is heavy on technology and consumer discretionary names. Software and services names account for almost 28% of the WisdomTree China ex-State-Owned Enterprises Index with retailers and apparel stocks combining for over 15%. [China Internet ETF Staves Off Alibaba Slump]