This Fund Tracks China’s Consumer Staples

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

With the highest population of any country, China has a huge consumer base. The Global X China Consumer Exchange-Traded Fund (ETF) (CHIQ) aims to take advantage of that by investing in a basket of stocks that are focused on the consumer discretionary and consumer staples sectors in China.

The fund invests the majority of its $66.12 million total assets in companies domiciled in or with their main business operations in China. Only securities which are tradable for foreign investors without restrictions are eligible. CHIQ has a dividend yield of 1.52% and makes annual distributions. The fund has an expense ratio of 0.65%.

While CHIQ holds far fewer names than a typical China consumer-based fund, it captures both consumer cyclical and non-cyclical sectors. CHIQ opts to go lighter in retailers and automobile manufacturers and invests heavily in food, tobacco and beverage sectors. It does not have a high daily trading volume for an ETF in general, but its efficient access to the consumer sector makes it one of the most popular sector-specific China ETFs on the market.

Investors often use CHIQ as part of a long/short play or as a complement to other ETFs that they hold, as the consumer sector is frequently underrepresented in many of China’s funds. From the chart below, you can see large up-and-down fluctuations for 2016 in CHIQ’s net asset value. CHIQ’s year-to-date return is down 0.16%, while the S&P 500 is up 10.08%.

 

chiq

CHIQ’s top five holdings are Galaxy Entertainment Group Ltd, 5.73%; JD.com Inc. ADR, 5.08%; Techtronic Industries Co Ltd, 4.64%; China Mengniu Dairy Co Ltd, 4.64%; and WH Group Ltd, 4.62%.

Almost 60% of the fund’s holdings are in the consumer cyclical sector, which means the fund relies heavily on the business cycle and economic conditions in China, and a small boost in China’s economy should enhance the fund’s value considerably.

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If you believe in the growing economy of China, I encourage you to look to Global X China Consumer ETF (CHIQ).

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


doug-fabian Exchange-Traded Funds

 

Doug Fabian is the editor of three publications: Successful ETF Investing, ETF Trader’s Edge, and Fabian’s Weekly ETF Report. Doug was previously known as one of America’s top mutual fund advisors, but in recent years he has made a revolutionary 100% shift to exchange traded funds (ETFs). He regularly appears at seminars around the country.

 

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