With Chinese stocks and exchange traded funds roaring higher this year, the time is appropriate for investors to consider alternative approaches to traditional China ETFs. One of the better alternatives is the WisdomTree China ex-State-Owned Enterprises Fund (NasdaqGM: CXSE).
CXSE 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.
“We think China remains in the early innings of its path to financial market liberalization,” said WisdomTree in a recent note. “Many index providers have a different definition of which types of Chinese stocks should be eligible for inclusion. So Chinese beta could be composed of seven share classes trading on four different exchanges. Due to companies’ decisions about where to incorporate and list their stock for trading, each share class has its own distinct characteristics.”
CXSE is higher by nearly 23% this year. A mix of Chinese stimulus measures have been providing the fodder for economic growth, such as lower taxes, no corporate tax breaks, monetary policy adjustments, and more market access for foreign companies to set up shop. All in all, Wall Street is looking at the Chinese government’s latest efforts as a plus for its economy and a boon for China ETFs.
Another Idea for China
Another avenue for accessing China’s sprawling equity market is the WisdomTree ICBCCS S&P China 500 Fund (NYSEArca: WCHN).
The ICBCCS S&P China 500 Fund tries to reflect the performance of the S&P China 500 Index, a group of 500 of the largest, most liquid Chinese companies by market capitalization and one of the only broad-based indices with exposure to all Chinese equity share classes, listed both in mainland China and internationally.
WCHN is up 20.30% this year.
“For investors looking for a broad access vehicle to Chinese equity beta, WisdomTree launched a Fund to track the S&P China 500 Index—WCHN, the WisdomTree ICBCCS S&P China 500 Fund,” according to WisdomTree. “MSCI is adding more A-shares this year and will have to continue to creep higher in their exposure, but our fund is already positioned across all the Chinese stocks.”
For more information on the Chinese markets, visit our China category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.