Global X China Consumer ETF (CHIQ)
|CHIQ At A Glance|
|Largest Holding||Dongfeng Motor Group Co.**|
|# Of Holdings||42**|
|2010 Gain (Loss):||10.79%|
|2009 Gain (Loss):||n/a|
|2008 Gain (Loss):||n/a|
|*As of 7/22/2011. **As of 7/6/2011|
CHIQ is a unique product that focuses its assets on the booming consumer sector of China. Many analysts feel that this sector will exhibit strong growth over the coming years as the population continues to grow, and the country continues to go through a prolonged period of urbanization.
Under The Hood
This ETF is designed to track a very targeted index that aims to reflect the consumer segment of China, with major holdings in car companies and electrical appliance manufacturers among others. In total, CHIQ contains 42 holdings, of which the top ten account for approximately half of the ETF’s assets. As such, CHIQ is rather top heavy—a common theme among the ETFs profiled in this report.
CHIQ’s portfolio includes various types of consumer companies; food and drink companies, retail firms, car manufacturers, media stocks, and household products companies are all included in the portfolio. CHIQ offers exposure to various sub-sectors that should perform well if China’s middle class continues to grow and increases in discretionary spending translated into higher demand for consumer products and services.
Despite the tremendous appeal of exposure to China’s consumer sector, most broad-based China ETFs maintain minimal weightings in this corner of the market. The most common biases are towards banks and oil companies; consumer products firms tend to be on the short end of the weighting spectrum. For investors who buy into the rather straightforward thesis behind the Chinese consumer sector, an investment in CHIQ could be a nice way to “correct” the sector biases held by other China ETFs.
It should be noted that the majority of its holdings are giant and large cap companies. While this may make for a safer investment, it can also negate some exposure to the particular sector as these major companies tend to do business all over the world rather than just inside the borders of China.
The biggest advantage of this product is relatively straightforward; it is the only fund of its kind. CHIQ represents a sector that many big-name funds tend to leave out, making it an ideal investment for those looking to gain exposure to the consumer segment of this emerging nation.
Expenses also work in this product’s favor, as its fees remain relatively low considering the nature of the exposure offered. On top of this, CHIQ can be traded commission free on Interactive Brokers, allowing investors to nix pesky commission fees that can contribute to the total cost of an ETF investment.
CHIQ might also be a good prospect for traders, as its average volume and AUM make it a good candidate for actively moving in and out of positions quickly and smoothly.
The few drawbacks of this ETF are not too significant. The top-heavy nature of this fund means that a small handful of companies are responsible for the majority of the performance—not exactly the broad-based portfolio some investors might seek. The focus on large cap stocks may also be troublesome, though this feature is relatively common among China ETFs.
CHIQ makes for a great complementary product to any balanced China portfolio, as this ETF offers exposure to a sector of the market that maintains tremendous long term potential yet is often underrepresented (or overlooked entirely) in broad-based China ETFs.
CHIQ isn’t perfect—the portfolio could have a bit more balance from an individual stock perspective—but the inclusion of various types of consumer companies results in a compelling risk/return profile.