Global X Funds, the New York-based ETF issuer that earlier this month launched four of the first sector-specific China ETFs, has added a fifth fund to its product line. The Global X China Energy ETF (CHIE) began trading on the NYSE Arca today, joining Global X funds focusing on the industrials (CHII), consumer (CHIQ), technology (CHIB), and financials (CHIX) sector. The energy ETF will track the S-BOX China Energy Total Return Index, a benchmark measuring the performance of China’s energy sector.
The index underlying CHIE is composed of 24 individual stocks, with the weighting to each capped at 10%. As of November 30, the index had an aggregate market capitalization of more than $750 billion and a price/earnings ratio of about 15.
Past Meets Future
The energy sector in China at the end of 2009 is an interesting blend of past and future. As China’s industrial sector continues to expand at a rapid pace, appetite for traditional sources of fuel (such as oil and coal) has become insatiable, and the country’s energy companies have expanded their operations around the globe in an effort to produce sufficient amounts of energy. This thirst for oil and coal has cemented China’s status as the world’s top polluter, and pushed the country’s emissions levels to the forefront of current climate change initiatives.
But China is also emerging as a leader in the development of clean technologies. “China is the world’s biggest source of carbon emissions,” writes Shai Oster for the Wall Street Journal. “Less understood is the way China is now becoming a source of some of the solutions.” The cheap labor and capital that fueled China’s manufacturing boom are now contributing to a boom in the alternative energy industry in the country.
|S-BOX China Energy Index|
|Oil & Gas||42%|
|As of 11/30/09|
China’s drive to become a leader in the clean energy industry faces some significant challenges – including the temptation of cheap coal – but the government’s support of the green energy sector is reason for optimism. With the “China price” providing a set of economics not possible elsewhere, development and innovation in the alternative energy industry has taken off.
CHIE reflects both the Chinese energy sector of today and tomorrow. The fund may be tilted heavily towards oil and coal companies, but it has a noticeable green tint as well. CHIE’s holdings include more than a half dozen material allocations to clean energy companies, including Suntech Power, Yingli Green Energy, Solarfun Power Holdings, and Trina Solar.
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Disclosure: No positions at time of writing.