Global X, the ETF issuer that last month launched the first sector-specific China ETFs, is expanding its line of products by launching two additional funds offering targeted exposure to the Chinese economy. The Global X China Technology ETF (CHIB) and Global X China Financial ETF (CHIX) began trading Wednesday on the NYSE Arca Exchange, bringing the number of China products from Global X to four and the total number of ETFs to six. The New York-based issuer also offers a Colombia ETF (GXG) and Nordic ETF (GXF).
CHIB will track the S-BOX China Technology Index, a benchmark designed to reflect the performance of the technology sector in China that includes only securities tradable for foreign investors without restrictions. The index has about 25 holdings, with the largest sector allocation going to internet industry (51%). The telecommunications and hardware / software sectors make up the remainder of the benchmark.
China is the world’s largest cell phone and internet market, with more than 600 million cell phone customers and 300 million internet users (a figure that grew 13.5% over the last year). Still, there is room for significant expansion, as penetration of internet users only 25% of total population, compared to 70% in the U.S. “China is driving its efficient manufacturing and rapidly expanding consumer base into higher value, technology-based products and services,” said Bruno del Ama, CEO of Global X Management.
| ETF | Index | Holdings | Expense |
|---|---|---|---|
| CHIB | S-BOX China Technology Index | 26 | 0.65% |
| CQQQ | AlphaShares China Technology Index | 34 | 0.70% |
CHIB will compete with another recently-launched fund, the Claymore China Technology ETF (CQQQ), which began trading on Tuesday. The overlay between CHIB and CQQQ will be significant – both have big allocations to Tencent, Baidu, Netease.com, and Alibaba.com, among others – but the products are far from identical.
The Financials ETF will track the S-Box China Financials Index, which is composed of companies that have their primary operations in the financial sector and are domiciled in China. Major holdings of CHIX will include China Construction Bank, Industrial & Commercial Bank of China, and Bank of China, three of the world’s largest financial institutions. As U.S.-based banks have shrunk in recent years, many emerging markets financials firms have moved to the forefront. With a steady stream of new customers (urbanization in China continues to occur at a rapid pace), the organic growth potential of Chinese banks is significant.
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Disclosure: No positions at time of writing.
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