This ETF utilizes the AlphaDEX strategy to invest in the Hong Kong stock market. This methodology involves a quantitative screening methodology designed to identify the stocks from a specific universe that have the greatest potential for capital appreciation. Specifically, stocks from the eligible universe are ranked on growth factors such as recent price appreciation, sales-to-price ratio, and one year sales growth, and separately on value factors such as book value to price ratio, cash flow to price ratio, and return on assets. Stocks with the highest scores are included in the benchmark, and the highest weightings are afforded larger weightings.
For those looking to make a play on Hong Kong equities, FHK certainly makes for a viable option, but it is on the upper range of expenses; you pay a premium for the strategy which has proven itself under numerous market environments. Hong Kong’s economy is considered a developed market, as it has outdone the surrounding Chinese region, giving weight to the thesis behind this product. The ETF has a portfolio of 40 stocks with around 40% of assets going to the top ten securities; while that isn’t the best diversity in the space, it certainly is not the worst. FHK would probably not be used as a core holding in a portfolio, but can be a great tool for segmenting Hong Kong stocks as a satellite holding of a bigger portfolio.