Solid Outlook For China Industrial ETF

by on January 6, 2010 | ETFs Mentioned:

China’s Purchasing Managers Index rose for the tenth consecutive month in December, signaling a steady expansion in the country’s manufacturing sector. According to the China Federation of Logistics and Purchasing, the index increased to 56.6 in December, up from 55.2 in November. A reading above 50 indicates growth, while a reading below 50 indicates contraction. Of the 11 categories that compose the PMI, nine rose, one fell, and one was unchanged in December compared with November.

While manufacturing activity in much of the developed world remains well below pre-recession levels, the industrial sector of China’s economy has made a rapid recovery “The PMI data suggest China’s economic growth rate in the fourth quarter of 2009 may have been its highest since the onset of the global financial crisis in late 2008,” writes J.R. Wu. China will announce fourth quarter GDP figures later this month.

“China Of Today” Thriving

Until recently, ETF investors looking to gain exposure to China’s industrial sector couldn’t do so without also investing in financial firms, tech companies, and other parts of the broad market. But the introduction of sector-specific China ETFs has made it possible for investors to gain targeted exposure to the world’s fastest-growing economy. The Global X China Industrials ETF (CHII) offers exposure to the growth engine of the Chinese economy, investing in engineering and construction firms, industrial equipment providers, transportation companies, and building materials stocks.

China’s rapidly expanding clean energy and technology industries have received a great deal of hype as the future of what soon could become the world’s second-largest economy. Moreover, the consumer products and services sectors are expected to expand significantly as wealth increases and the middle class expands. But while solar energy and technology may be the “China of tomorrow,” industrials remain the “China of today,” accounting for a significant portion of the economy. An indication that this sector is thriving is not only good news for China, but a positive development for countless commodity-intensive economies that rely on China for a significant portion of demand.

Sector-Specific China ETF Options

In addition to CHII, Global X also offers funds focusing on the technology (CHIB), financials (CHIX), consumer (CHIQ), and energy sectors (CHIE). Since their launch in late 2009, these funds have become tremendously popular with investors looking to achieve targeted China exposure. Global X is expected to continue to expand its line of China-specific funds in 2009, with a materials fund among the potential new offerings.

For more information on sector-specific China investing, see this guide. For updates on all new ETF options, sign up for our free ETF newsletter.

Disclosure: No positions at time of writing.