Time to enter China?

greypiggi,

thanks for the inspiration. i've taken a look at the names and at multi-year lows, 8 P/E in an economy that you know will grow (eventually), pretty much flat to NAV it's worth a good shot at it.

Have initiated a position today and looking to add more if it dips further.

iShares FTSE A50 China Index ETF is a synthetic ETF.

Wouldn't some other fund that owns the actual underlying shares be safer? Something like the SPDR S&P China BMI Fund (NYSE: GXC) and the newly-launched ChinaAMC CSI 300 Index ETF (HKSE: 83188) comes to mind. Of course, these two each have their shortcomings, but I would think that actually owning the underlying shares should be a priority when evaluating ETFs.

(19-09-2012, 07:04 AM)yeokiwi Wrote: Exporting wise, they probably have to up their technical ladder to producing good local branded products for the world rather than being the factory for the world. In this aspect, I had yet to see the transformation.

It is already happening. Having such a huge domestic market allows them to nurture their own global companies. Huawei is all over the world. China Southern Rail (where Midas Holding has a stake) sells their Rolling Stock to India. Tencent the company behind QQ and Weixin has overseas ambition ( I was in India recently and was surprised to find Indians using weixin ! ). Of course they all started by copying someone else's idea but isn't that how the Japanese and Koreans started as well ?

Quote:Long term wise, they will face the same problem as Singapore with a reducing TFR. The ageing population.

Their problem could be worst. We had our two is enough policy, theirs is single child policy (except farmers).

(22-09-2012, 12:05 AM)touzi Wrote:

(19-09-2012, 07:04 AM)yeokiwi Wrote: Exporting wise, they probably have to up their technical ladder to producing good local branded products for the world rather than being the factory for the world. In this aspect, I had yet to see the transformation.

It is already happening. Having such a huge domestic market allows them to nurture their own global companies. Huawei is all over the world. China Southern Rail (where Midas Holding has a stake) sells their Rolling Stock to India. Tencent the company behind QQ and Weixin has overseas ambition ( I was in India recently and was surprised to find Indians using weixin ! ). Of course they all started by copying someone else's idea but isn't that how the Japanese and Koreans started as well ?

http://money.cnn.com/magazines/fortune/g...China.html

The above is the top china company list by revenue in Global 500.
I have a hard time looking for a non state owned company, Hongkong based companies excluded.

After doing some scanning, only
Lenovo
Huawei
Ping An Insurance
China Pacific Insurance
Weiqiao

They are progressing, but it is still a long way to go.

An interesting comparison will be to compare Japan from 1950 to 1980 and China from 1980 to 2010.
The following article talked about the challenge of Japan to US in the 1980s.
http://www.nytimes.com/2011/01/23/busine...wanted=all

In short, Japan lost the technological war with US in the 80s and 90s.

2823.hk is a synthetic ETF, it does not own the A shares directly. Be careful with its counter-party risk.


please feel free to correct if I am wrong.

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There is a long long way before RMB can become reserve currency. Though RMB has depegged from USD, there are trillions of RMB backed by USD(the foreign reserve of China). So it is difficult to say RMB is an independent currency, how could it become a reserve currency?

Yes, it is a synthetic. I picked it over a fund because lower fees. < 1% per annum and normal brokerage fees for transaction. Fund sales and mgmt fees tend to be higher. Counterparty risk is there but it is HSBC.

Anyway just initiated a small position only. As mentioned are prepared to double down 2 more time. I am a buy down type person....

Quote:Yes, it is a synthetic. I picked it over a fund because lower fees. < 1% per annum and normal brokerage fees for transaction. Fund sales and mgmt fees tend to be higher. Counterparty risk is there but it is HSBC.

Here are some notes that I have on the Chinese companies ETFs that I know of.

iShares FTSE A50 China Index ETF (HKSE: 2823)
- Synthetic.
- Exposure to top 50 A-shares by full market cap.
- More than 60% in financials.
- Management estimates of total expense ratio: 1.39%
- FTSE A50 index tracks SSE Composite relatively well.

SPDR S&P China BMI Fund (NYSE: GXC)
- Owns actual underlying shares.
- Exposure to top 600 China-domiciled companies, regardless of listing location, that are available to investors. Owns A-Shares, H-Shares, ADRs etc.
- Less than 40% in financials.
- Management estimates of total expense ratio: 0.59%
- Has outperformed SSE Composite in the last 4 years. Probably due to SSE Composite being one of the the world's worst performing stock indices, even worse than the Nikkei 225.

ChinaAMC CSI 300 Index ETF (HKSE: 83188)
- Owns actual underlying shares.
- Exposure to the top 300 companies in terms of market cap and liquidity on the Shanghai and Shenzhen Stock Exchanges (A-Shares)
- Less than 40% in financials.
- Management estimates of total expense ratio: 0.99%
- CSI 300 index tracks SSE Composite relatively well.
- Subject to RQFII quota of RMB 5B.

Besides owning the actual underlying shares, the other two index ETFs also have the advantage of lower cost than the iShares FTSE A50 China Index ETF. Depending on how you view the financial companies in China, the lower weighting on financials of the other two ETFs may also be considered an advantage.

One big drawback of the ChinaAMC CSI 300 is that it is a relatively new concept - the first RQFII fund. As such, there is some regulatory risk. For example, will their quota of RMB 5B be increased once the limit is reached? If not, then the ETF may start trading at a premium/discount to NAV.

Anyway, my understanding is that if you want a piece of the Chinese companies pie, there are better and cheaper ways to do it than the iShares FTSE A50 China Index ETF.

YMMV.

There should be more A shares ETF carrying physical shares in HKSE in next few mths