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Published: December 8, 2009
There are a plethora of Chinese ETFs
already on the market, so what can investors expect from another
offering?
Emerging powerhouses of Chinese business.
This ETF isn't limited by size and has free reign to invest
across the entire market capitalization spectrum. Thanks to its
flexible all-cap approach, shareholders will have a stake in
small businesses like China Huiyuan Juice Group as well as
giants like PetroChina (NYSE: PTR), and everything in
between.
By contrast, the much larger iShares FTSE/Xinhua China 25
(NYSE: FXI) is strictly limited to the market's largest
stocks -- most of which are highly-regulated, state-owned
enterprises. And by concentrating on huge banks and commodities
stocks, there is nothing left for other sectors. In fact, the
fund doesn't own a single healthcare, consumer staple or
technology stock.
Claymore's Exchange Traded Chinese All-Cap (NYSE: YAO)
rectifies that problem. The 100-stock portfolio is anchored with
familiar names like Aluminum Corp. of China (NYSE: ACH),
but it also includes plenty of others that are far more
leveraged to the country's explosive growth in domestic
consumption.
That list includes promising companies like electric car battery
maker BYD, online gaming firm Shanda Interactive (Nasdaq:
SNDA), travel portal Ctrip International (Nasdaq: CTRP),
and search engine Baidu.com (Nasdaq: BIDU), China's
answer to Google.
If you're looking to capture China's true growth potential,
these companies are a much better option than the giant
exporters that only deal with foreign customers. And now,
investors can own a broad basket of these stocks along with
China's blue-chips all rolled up in one convenient package.
The market greeted the new fund with a warm reception. In
fact, more than 1.3 million shares changed hands on its first
day out of the gate -- the heaviest trading of any launch this
year. I don't pay terribly much attention to volume, but the
activity does show that investors are still buzzing about China.
And for good reason.
I've already outlined a number of bullish reasons that should
excite long-term investors. There's no need to repeat them again
here, other than to say China continues to lead the global
economy out of this recession and could grow ever more powerful
in the years ahead.
Spurred by an effective mix of stimulus initiatives, economic
output continues to expand. After growing at "just" +6.1% from
January through March, GDP rose +7.9% in the second quarter and
then +8.9% in the third -- China isn't just growing, it's
growing at an increasing rate.
That acceleration won't last forever, but next year's projected
growth rate of +9.0% would be the world's strongest. I expect to
see policy makers raise bank reserve requirements to keep a lid
on inflation and prevent a lending bubble, which could bring the
added benefit of currency appreciation.
In any case, China's 800 million-plus consumers only account for
about 30% of GDP -- versus two-thirds here in the U.S. The
higher that percentage ticks, the stronger the earnings (and
share prices) for YAO's small, entrepreneurial holdings.
YAO will move in the same direction as most other China-based
funds, but with greater magnitude. So if you think the market
has more to give, then this new fund could be a smart choice.
-- Nathan Slaughter
Editor
StreetAuthority Market Advisor
Half-Priced Stocks
The ETF Authority
P.S. -- China used to be off-limits, but the country opened its
doors to foreign investors and profits poured in for those who
got in early. Don't miss the opportunity to take advantage of
another investment by
clicking here. |
