Consider a Broad Investment in China

[Great Wall of China]

by: Doug Fabian

China’s growth is assured by its rising population, which already is the world’s largest. As long as broader industrialization continues, drawing peasants into the ever-increasing number of Chinese cities and factories to fuel Western-style consumption, China’s economy will continue to grow. However, it is difficult to know what sectors will benefit the most.

The Chinese government has its proverbial thumb on the scale, picking winners and losers; business transparency is not yet part of the culture. Western investors also are handicapped in understanding the consumption habits of the Chinese consumer. One way to invest in China without trying to pinpoint a breakout sector is through SPDR S&P China ETF (GXC).

GXC is a fund which, before fees and expenses, attempts to match the performance of a market-capitalization-weighted index. That index seeks to define and measure the investable universe of publicly traded companies domiciled in China and available to foreign investors. This non-diversified fund employs a sampling strategy and invests a substantial amount of its assets in securities comprising the index or in depository receipts representing securities comprising the index.


GXC has gained 1.48% this year, recovering from a sharp drop this summer. Last year, the fund rebounded nicely from a June slump to end the year up 18.92%. The current yield is 2.13%.

GXC is invested in the areas you would expect for an all-China fund: financials, 32.37%; information technology, 17.24%; energy, 11.52%; as well as industrials, telecommunication services, consumer discretionary and consumer staples. Its top 10 investments account for 42.78% of its holdings. Among these are China Construction Bank Corporation H Shares, 6.85%; Tencent Holdings Ltd., 5.88%; China Mobile Ltd., 5.82%; Industrial and Commercial Bank of China Ltd. H Shares, 5.79%; and Baidu Inc. Sponsored ADR Class A, 4.44%.

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We now live in a world where considering at least a little exposure to the most-populous country on Earth makes sense. But peering over the Great Wall to figure out what will rise to the top can be difficult. SPDR S&P China ETF (GXC) lets you invest in the idea that China will rise, without being too concerned about what sectors, exactly, are going to succeed there.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

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