International Investing

Gain Exposure to the Large-Cap Chinese Stocks with This Fund

The iShares China Large-Cap ETF (NYSEARCA:FXI) tracks a market-cap-weighted index of the 50 largest Chinese stocks traded on the Hong Kong Stock Exchange.

FXI, one of the oldest China-focused ETFs on the market, is a concentrated portfolio of 50 large-cap H-shares, P-chips and Red Chips listed in Hong Kong. Notably, mainland-listed A-shares and U.S.-listed Chinese mega-caps (classified as an N-share) are excluded from the fund’s portfolio.

The fund draws its selection universe from the FTSE All World Index. Stocks are further screened for liquidity to ensure that the market-cap-weighted index is tradable. To avoid overconcentration in the index, stock weights are capped at 9%. The index is reconstituted and rebalanced quarterly.

Below is a sector-by-sector breakdown of FXI’s holdings.

Source: iShares.com

The fund’s benchmark is the FTSE China 50 Index. FXI, launched October 5, 2004, has 119,250,000 shares outstanding and a price to earnings ratio (P/E) of 13.31.

The fund has $4.9 billion assets under management, along with 50 holdings. It has a 0.02% average spread and a 0.75% expense ratio. FXI currently trades around $40 a share, giving it a nice 2.02% distribution yield.

Source: StockCharts.com

Why choose this iShares fund? 1) To gain exposure to large-cap companies in China; 2) To gain access to 50 of the largest Chinese stocks in a single fund.

However, as with any opportunity, I urge all potential investors to exercise their own due diligence in deciding whether or not this fund fits their own individual portfolio goals.

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Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.