China Investments with U.S. Protections

[interlocking Chinese and American flag puzzle pieces]

China represents a phenomenal investment opportunity because of the size of its domestic market and its economic development-driven growth. However, as an emerging-market economy, it leaves something to be desired in the rule of law and ethical transparency.

These risks present something of a dilemma for an investor: how do you join in the bonanza of China’s wild, wild East, while taking shelter in the protections of long-settled Western law and accounting practices? One approach to threading this needle is taken by the PowerShares Golden Dragon Halter USX China Portfolio (PGJ).

PGJ seeks investment results that correspond, before fees and expenses, to the price and yield of an index of securities of U.S.-exchange-listed companies that are headquartered or incorporated in the People’s Republic of China. The listed securities may include American depository receipts (ADRs), limited partnership interests, shares or stocks. This fund is non-diversified.

The fund has gained 46.97% this year, with especially strong growth starting in July. The fund has seen a dip in November, representing a potentially attractive entry point for new investors. The yield is 0.86%.


The fund is mostly invested in information technology, with investments in that sector at 55.94%. The fund also invests in consumer discretionary, 18.5%, and health care, 7.88%, as well as energy, telecommunication services, industrials and financials. The top 10 holdings in the fund comprise 54.52% of the fund’s total assets. Individual holdings include Baidu Inc., 7.98%; International Ltd., 7.95%; Qihoo 360 Technology Co Ltd, 7.64%; SINA Corp., 6.40%; and NetEase Inc., 6.10%.

According to the World Bank, China is the 94th most difficult country in the world in which to do business, while the United States is the fourth easiest. In terms of growth, however, Bloomberg finds that China is the third best in the world, while the United States was only ranked at 32. The advantages of making money in China but doing business in the United States are obvious, and the PowerShares Golden Dragon Halter USX China Portfolio (PGJ) is one way to employ that strategy.

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 e-mail. You just may see your question answered in a future ETF Talk.

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