Obscure China ETF Surges 56% YTD

Plenty of China ETFs are posting stellar returns this year, but some of those funds remain overlooked. That is the case with the Global X China Materials ETF (NYSEArca: CHIM), which is up nearly 56% year-to-date.

CHIM tracks the Solactive China Materials Total Return Index. Investors should be aware that this is a small ETF with just over $4.2 million in assets under management. CHIM has a standard deviation of 29.1% and trades at a discount to the U.S. materials sector and the MSCI Emerging Markets Index.

While the Chinese economy may be slowing from its breakneck speeds of yesteryear, China’s markets and country-specific exchange traded funds (ETFs) may enjoy a more solid and sustainable growth rate. Overall, policy makers may show a willingness to reform. The global reflation trade could help support exports. The Chinese yuan is also stabilizing.

CHIM is surging “as inefficient and illegal production in the Asian nation is shut down, giving companies in the exchange-traded fund healthier profit margins and more breathing room to expand output,” reports Luzi-Ann Javier for Bloomberg. “That’s made Global X China Materials the third-best performing ETF linked to commodity producers this year, with a return almost quadruple the gain of the SPDR S&P 500 ETF, which tracks the record-breaking U.S. equities index, and triple the rally in MSCI World Materials Sector Index. In the year through Wednesday it was the second-best performer.”

CHIM, which turns eight years old in January, holds 31 stocks. Over 57% of the ETF’s holdings are metals and mining firms while 23% are chemicals makers. Over 19% of the ETF’s roster is dedicated to building materials companies.