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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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Small But Powerful

china-etf-ecnsFor those who are really adventurous, I suggest the iShares MSCI China Small-Cap ETF (ECNS), a collection of 353 Chinese stocks with smaller market caps than those of either EWH or PGJ.

While the fund and index it tracks are considered small caps, Morningstar suggests it’s more mid-cap in nature, with the average market cap at $1.1 billion along with a maximum market cap of $4.4 billion. Whatever you want to call it, I don’t think this China ETF is intended for the risk-averse.

If you’ve heard of any of the names in its top 10 holdings I’d be very surprised. Given the relative anonymity combined with the fact these are small- and mid-cap stocks in China, it’s a very good thing that there are 358 holdings with only 12.6% of the portfolio in the top 10. The remaining 348 stocks have an average weighting of just 0.25%. A lot can still go wrong, mind you, but with the bets spread out as they are the downside is somewhat restrained.

The average investor considering a new move into China should probably only buy ECNS in combination with EWH or another large-cap China ETF. Allocate 75%-85% of your committed dollars to the large-cap and the remaining 15%-25% to ECNS. Some might consider this overly conservative, but I’d rather be safe than sorry.

As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.

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