A New Way To Invest In
China's Hottest Sectors
The Dynamic Wealth Report
April 9, 2010
by Corey Williams, Editor
You may not know it, but there’s a great way invest in China. It’s new, and I’ll tell you all about it in a moment…
First, a little bit about China.
One of the reasons we’re exiting the recession so quickly is because of
China’s rapidly growing economy.
Chinese demand for commodities and basic materials started growing just
over a year ago. That’s when the massive government stimulus plan kicked
in.
Right now the Chinese economy is showing no signs of slowing down. In
the fourth quarter of 2009, the Chinese economy grew at a blistering
10.7% clip.
This pace is a little too fast for the leaders of China. They fear a
growth rate over 9.5% is unsustainable and will trigger inflation.
The government would be much happier with an 8.5% annual growth rate.
The Chinese central bank has already “tapped the brakes” on the economy. They’re reigning in bank lending by increasing bank reserve
requirements.
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And just last week, the trading range of China’s currency, the Yuan, was
hiked to its highest level in almost a year. A stronger Yuan makes
Chinese products more expensive on global markets. It has the impact of
slowing demand.
Next week we’ll find out if the “brake tap” had the desired effect. That’s when China’s first quarter economic data will be released.
Despite the central bank efforts, economists are expecting a jump in the
annual growth rate to 11%. They’re also expecting inflation to increase.
Any way you slice it, a hike in Chinese interest rates is a near
certainty.
The usual knee jerk reaction to an interest rate hike is a stock market
selloff. If the Chinese market dips, it would present a great buying
opportunity.
One way to get in on the action is a broad-based China ETF.
Two of the most popular China ETFs are iShares FTSE/Xinhua China 25
Index Fund (FXI) and iShares MSCI Hong Kong Index Fund (EWH).
However, I need to warn you, they’re both heavily weighted toward
financials. A full 47% of FXI is made up of financial company stocks.
And EWH is even worse. Almost 60% of EWH are financial stocks.
I think there’s a better way to invest in China ETFs.
In December, Global X Funds introduced the first family of Chinese sector
specific ETFs.
Here’s the list…
- Global X China Consumer ETF (CHIQ)
- Global X China Energy ETF (CHIE)
- Global X China Financials ETF (CHIX)
- Global X China Industrials ETF (CHII)
- Global X China Materials ETF (CHIM)
- Global X China Technology ETF (CHIB)
These sector specific ETFs by Global X Funds are very new. Obviously
they don’t trade anywhere near the volume of the more established ETFs,
but activity is growing.
The market’s been waiting for these China specific sector ETFs. They’re
sure to gain in popularity very quickly.
The reason’s simple. The best investment opportunities in China going
forward will be in areas other than financials.
These Global X Funds offer the best way to drill down into specific
Chinese sectors.
So keep an eye on China’s first quarter economic data. It’s due out on
April 15th. Watch for a good deal of market volatility. And remember,
it’s a perfect opportunity to put Global X Funds new Chinese sector
specific ETFs to work for you.
• Williams-Sonoma (WSM) was upgraded by
Oppenheimer this week. They now have an outperform rating on the stock. The analyst expects the home décor retailer to continue to improve
because of the restructuring it underwent during the recession.
• MGM Mirage (MGM) was downgraded to sell by Soleil.
The analyst was disappointed in the February Las Vegas data.
• Thomas Weisel started coverage on Mindspeed (MSPD)
this week with an overweight rating. The semiconductor maker introduced
a new chip for use in routers to broadcast video and optical transport
networks.
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