China’s Expanding Middle Class May Propel Profits

china shopping

by: Doug Fabian

China’s population is not just expanding but is getting wealthier and more urban than at any time in its long history. Further, the Chinese government has an explicit policy to refocus its economy towards domestic consumption, rather than infrastructure investment. This expanding middle class is explicitly targeted by Global X China Consumer ETF (CHIQ).

CHIQ is designed to reflect the performance, before fees and expenses, of an index of companies that have their main business operations in the consumer sector and are domiciled or have their main business operations in China. The non-diversified fund invests primarily through American and Global Depository Receipts.

CHIQ has gained 9.55% so far this year, after recovering from a sharp drop in July and a minor dip in October. Last year, the fund gained 8.4%. If you like income, the fund is yielding 1.05%.

CHIQ_112613

The fund’s top 10 holdings make up 48.45% of its assets. Those companies include Dongfend Motor, 5.19%; Tingyi Holding Corp., 5.15%; Guangzhou Auto Group, 5.04%; China Resources Ent., 4.91%; and Hengan International, 4.84%. Not surprising for a consumer-focused exchange-traded fund (ETF), 57.7% of its holdings are in the consumer discretionary sector and 33.85% are in the consumer staples sector. There also are some holdings in industrials, technology and healthcare.

China is seeking to advance beyond its status as the world’s biggest emerging market to become a middle-class behemoth. This transition marks a fantastic opportunity for growth. And Global X China Consumer ETF (CHIQ) is a fund that is designed to take advantage of that opportunity

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.

In case you missed them, check out my articles on Chinese ETFs from the last five weeks: HAOPGJ, GXC, MCHI and FXI. I also invite you to comment in the space provided below.

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