The consumer staples sector is usually seen as boring, low volatility, yield-driven destination. When it comes to Chinese staples names and the Global X MSCI China Consumer Staples ETF (CHIS), “boring” isn’t the word to use.
CHIS, which celebrated its first anniversary earlier this month, follows the MSCI China Consumer Staples 10/50 Index. The fund is up 49.32% year-to-date, easily making it one of the best-performing
consumer staples ETFs of any variety and of the top China sector ETFs.
When it comes to sector ETFs, many investors solely focus on domestic offerings, but there are other ways to tap sector-level opportunities, including China ETFs. Investors considering China sector ETFs should note that there is likely to be dispersion among the various sectors, as is the case with domestic sector ETFs.
The Factors That Benefited
A variety of factors have benefited CHIS in 2019.
“Early in the year, pork prices began to rise with the outbreak of African swine flu. Throughout the year, the endemic infected supply chains critical to production and consumption,” according to Global X research. “As the world’s largest consumer and importer of pork, Chinese consumers bore much of the burden of higher prices. However, higher pork prices raised the valuation for some of the world’s largest pork producers, many of which are represented within China’s Staples sector (CHIS).”
CHIS allocates over half its weight to makers of food products and over 34% of its roster is devoted to beverage makers.
Related: Consider This Consumer Cyclical ETF in 2020
“CHIS is a long-term play on the growth of China’s middle class and the country’s increasing efforts to turn its massive economy to more domestic consumption,” reports InvestorPlace. “Food seasoning and alcohol are among the more compelling staples segments in China and CHIS is levered to those themes by allocating more than 85% of its weight to food and beverage companies.”
CHIS holdings have an average market value of $15.9 billion, which is far smaller than a comparable domestic fund, but the Global X’s fund return on equity of 15.30% is strong.
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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.