A Big ETF For Big Chinese Stocks

With stocks in developing economies resting at their highest levels in about three years, some investors are apt to ponder the fate of stocks in the largest emerging market – China. The iShares China Large-Cap ETF (NYSEArca: FXI), one of the largest China exchange traded funds listed in the U.S., is up almost 26% year-to-date.

Ongoing reforms, notably from the supply side, could further support Chinese economic growth. Reforms have bolstered industrial profitability and strengthened commodity prices. China’s exporters are also enjoying improvements from a rebound in global trade.

Investors are coming to grips with the fact that China’s economic growth is not what it was during the go-go days of the emerging markets boom. For an economy often deemed as too hot, steady, consistent growth could be what foreign investors really want to see.

The Chinese economy is also shifting towards domestic-oriented consumption as a main growth driver. Consequently, consumption-driven sectors liek technology and services are becoming a growing component in the economy.

“FXI has an average annual return of 8.62% since its inception. As China just been through a stock market crash in 2015, its average annual return in the past 3 and 5 years are only 4.78% and 5.82% respectively. However, its stock market appears to show some signs of recovery lately with a return of 18.91% in the past 1 year,” according to a Seeking Alpha analysis of FXI.