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Which China ETF is Right For You?

These three China ETFs offer investors different ways to play Chinese stocks' attractive valuation

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Power to the People

china-etf-pgjLooking to the mainland, one of the better performers over the past five years is the Power Shares Golden Dragon China Portfolio (PGJ), a China ETF that invests in companies deriving a majority of their revenue in the People’s Republic of China.

More China-centric than EWH, it’s composed of 72 stocks participating in a total of 10 sectors with technology and consumer discretionary stocks representing 78% of the $306 million in total net assets. Its top 10 holdings have a 53% weighting, with the remaining 62 stocks accounting for 47% of the portfolio. Far less concentrated than EWH, it’s a good ETF to own if you believe in the power of numbers.

From a cost perspective, it’s MER of 0.70% is 18 basis points higher than the EWH. However, its performance over the last five years — annualized total return of 18.4% through February 12 — has been nearly identical. A look back at the two funds’ performance over the past decade shows they each got to the same result in entirely different ways. If volatility isn’t your thing, PGJ might not be the right China ETF because its annual returns have been all over the map.

All the stocks in PBJ are listed on U.S. exchanges, so it’s possible for someone to recreate the portfolio by purchasing all 72 of its stocks. But the whole point of this article is to avoid having to do that by investing in a China ETF instead. While I don’t profess to be intimately aware of Chinese stocks, there are some names in the top 10 that I recognize such as China Mobile (CHL), which has begun selling iPhones in China, Ctrip (CTRP), China’s biggest online travel company, and Vipshop (VIPS), China’s big player in e-commerce flash sales. If you can handle the bumps along the way, it’s certainly a good China ETF.

Article printed from InvestorPlace Media, http://investorplace.com/2014/02/china-etf-right/.

©2017 InvestorPlace Media, LLC