ETF Talk: Chinese Energy ETF Offers Juice

Doug Fabian

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

We finish our series on energy sector exchange-traded funds (ETFs) with today’s look at a fund that focuses on the energy sector in China. The country has achieved remarkable industrial growth in the past several decades, and seems destined to maintain its pace in the near future. All of that growth requires increasingly large amounts of energy; indeed, China has become one of the world’s major players in the energy industry due to its voracious demand. An ETF that tracks public energy companies in China is the Global X China Energy ETF (CHIE).

This non-diversified fund seeks investment results that correspond generally to the performance of investable energy sector companies in the Chinese economy. CHIE has traded mostly flat in 2013, gaining only 2.55% so far, but it had a gain of 11.45% in 2012 and offers a yield of 1.67%. As Chinese companies continue to demand more and more of the world’s energy, expect the companies tracked by CHIE to profit.

CHIE is invested in a variety of sectors that contribute to the consumption of energy in China. The energy sector, of course, leads the way, with 39.83% of the fund’s total assets. The other sectors which CHIE has money in are utilities, 33.29%; basic materials, 19.25%; industrials, 5.14%; and technology, 2.49%.

Since CHIE is a China-focused ETF, the individual companies the fund invests in are mainly traded on foreign exchanges. Of its top ten holdings, which comprise 64.68% of its assets, only three are traded on Wall Street, and those three have very low volume on the American market. And none of these three stocks are among the top five companies held by CHIE, which are: China Petroleum & Chemical Corporation, 9.44%; PetroChina Co Ltd, 8.48%; CNOOC, Ltd., 8.23%; China Shenhua Energy Company, 7.79%; and China Resources Power Holdings Co., Ltd., 5.47%.

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With no end to Chinese growth in sight, expect the country’s demand for energy, and CHIE, to keep ascending. Even if the growth does slow, China’s large population will continue to consume energy, meaning sustained profits for those who invest in Chinese energy.

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 email me by clicking here. You may see your question answered in a future ETF Talk.

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