27 ETF Roads to China!

Ron Rowland You hear a lot about China in the financial news, and with good reason. China’s explosive growth is changing the world in unprecedented ways … and creating once-in-a-lifetime investment opportunities for those who play it right.

Can you also make money from individual China stocks? Sure, if you watch them carefully and get good advice from an expert like Tony Sagami. Many people also find exchange traded funds (ETFs) are one of the best ways to get involved in China.

They allow you to own a diversified portfolio of Chinese stocks with one simple trade on a U.S. exchange.

China is an economic giant!

Almost two years ago, I told Money and Markets readers How to Trade China with ETFs. While everything in that article is still accurate, now we have even more alternatives. So today I’m going to give you a rundown on all the U.S.-based ETFs that focus on China — 27 of them, to be exact. I’ll break the list down into six categories for you.

Broad-Based China ETFs

The ETFs in this category are one-stop-shopping for investors who want an allocation to China. At times they may be outpaced by more specialized funds, but all are good choices for long-term China exposure.

iShares FTSE China 25 (FXI)
SPDR S&P China (GXC)
PowerShares Golden Dragon China (PGJ)
Guggenheim China All-Cap (YAO)
iShares MSCI China Index Fund (MCHI)
First Trust China AlphaDEX Fund (FCA)

China Specialty ETFs

This group zeroes in on certain subsets of China’s stock market.

iShares MSCI Hong Kong (EWH)
iShares FTSE China (HK Listed) Index Fund (FCHI)
Market Vectors China A-Shares ETF (PEK)
iShares MSCI China Small Cap Index Fund (ECNS)
Guggenheim China Small Cap (HAO)

Hong Kong was once a British colony and now has a special status as part of China. EWH invests in Hong Kong companies while FCHI buys Chinese companies listed in Hong Kong.

China A-shares stocks are listed on the Shenzhen and Shanghai exchanges, and have historically been difficult for foreigners to buy. PEK makes it easier. ECNS and HAO narrow in on China’s small cap stocks.

China Sector ETFs

I’ve been trading U.S. sector mutual funds and ETFs for about 25 years with great success. So I’m glad to see a growing list of ways you can invest in particular industries in China. Here’s the current list.

EGS INDXX China Infrastructure (CHXX)
Guggenheim China Real Estate (TAO)
Guggenheim China Technology (CQQQ)
Global X China Consumer (CHIQ)
Global X China Energy (CHIE)
Global X China Financials (CHIX)
Global X China Industrials (CHII)
Global X China Materials (CHIM)
Global X China Technology (CHIB)

China’s economy is diversified across many sectors.

Leveraged China ETFs

If you are particularly bullish on China — and are ready for a wild ride — these two ETFs offer leveraged exposure to Chinese stock indexes. Just keep in mind that leveraged ETFs don’t always perform the way you might expect. These are best used for short-term trading.

• ProShares Ultra FTSE China 25 (XPP)

• Direxion Daily China Bull 3x (CZM)

Inverse China ETFs

You can also get ETFs that are designed to move up if Chinese benchmarks go down. Like the leveraged ETFs above, these are intended for short-term use.

ProShares Short FTSE China 25 (YXI)
ProShares UltraShort FTSE China 25 (FXP)
Direxion Daily China Bear 3x (CZI)

Inverse ETFs can sometimes be useful as a “hedge.” Say you own a China stock or ETF with a substantial open gain that you don’t want to “realize” for tax purposes. Adding an inverse China ETF during downturns can help smooth out the ride.

China Currency ETFs

If you aren’t interested in China’s stocks but think that its currency will appreciate relative to the U.S. dollar, these two products may be what you’re looking for.

Market Vectors Chinese Renminbi/USD ETN (CNY)
WisdomTree Dreyfus Chinese Yuan (CYB)

China’s currency is worth a look, too.

This just shows you what is available right now. New ETFs are coming out all the time, so I fully expect this list to grow. Some of the ETFs I’ve named are very large and actively traded; others, not so much. Do some further research on your own before you buy any of them.

Also keep in mind that as good as the long-term trends may seem for China, it’s still an emerging market. Prices can change very quickly, for better or worse.

ETFs give you many roads to China. You decide which works for you.

Best wishes,

Ron

P.S. If you’re looking for specific ETF buy and sell recommendations for China as well as other global markets, check out my International ETF Trader service. My subscribers own one of the above-named ETFs right now. Join us and you can see which one it is.

Ron Rowland is widely regarded as a leading ETF and mutual fund advisor. You may have read about Mr. Rowland and his strategies in publications such as The Wall Street Journal, The New York Times, Investor's Business Daily, Forbes.com, Barron's, Hulbert Financial Digest and many more. As a former mutual fund manager from 2000 to 2002, Ron was a pioneer in using ETFs inside of mutual funds. Today, he is the editor of International ETF Trader, dedicated to helping investors use ETFs to profit from ever-changing global market conditions.

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Ric Thursday, May 19, 2011 at 1:31 pm: Many years ago I designed a 401k program for our company and other companies as well utilizing 4 American Funds representing cash, bonds, domestic stock, and international stocks. The employees clamored for more choices, emerging markets, precious metals, etc. So I gave them 3000 choices. It was so overwhelming that they started asking me which funds of the 3000 that should invest in. So it is with these choices, 27 in all, which one? Sometimes too many choices can work against you.

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