PGJ Invesco Golden Dragon China ETF Trust

2013 witnessed a raging bull market across the board. From developed markets to emerging nations, almost all the countries participated in this rally. Thanks to improved economic conditions in the U.S. and a recovering Europe, the emerging markets, including China, are also posting solid numbers (Read: 3 European ETFs Leading the Recovery).
 
Upbeat Export Data
 
The world’s second largest economy – China – recently surprised the market with its November export figures. China reported $33.8 billion of trade surplus in November, the biggest surplus in around 5 years. This marked a sharp 8.7% climb from last month’s trade surplus.
 
Exports, the backbone of the Chinese economy, are now on track, buoyed by a gradual recovery in the developed markets.
 
China’s exports for the month of November rose 12.7% year over year to $202.21 billion, clearly outpacing the consensus estimate of 7% year-over-year growth. The November export figure also improved upon the 5.6% growth reported in the preceding month (Read: China ETFs Jump on Government Reform Afterglow).
 
Resurgent consumer demand from the U.S. and Europe helped China’s exporters to gather momentum. The economy’s exports to Europe were outstanding at 18.4% year-over-year growth in November as compared to a growth figure of 12.7% in October this year. Exports to the U.S. rose 17.7% year over year versus 8.1% in October.
 
Besides the broad-based global recovery, seasonal demand due to the ongoing holiday season and approaching Christmas led to robust China figures. However, other Asian exporters did not perform as well as China. Its neighbor South Korea posted a paltry 0.2% growth in exports for November against China’s double-digit growth rate.
 
While the picture on the export front was encouraging, imports rose only 5.3% year over year to $168.4 billion. The import figure is believed to be the lowest since July this year.
 
Other Positive Data
 
China’s consumer inflation for the month of November came unexpectedly lower at 3%, compared with 3.2% reported in October. The lower inflation number is expected to ease market fears of a rate hike in this week’s official meet to discuss policy and reform priorities for 2014.
 
Apart from the upbeat export data, the second largest economy posted 7.8% gross domestic product (GDP) growth in the third quarter, up from a two-decade low of 7.5% reported in the second quarter.
 
Market experts believe that strong growth in China’s exports sector is expected to boost the economy’s GDP in the upcoming quarters. With the global economy gaining strength, the Chinese export sector is all set to benefit from flourishing trade activities. (Read: Invest in a Resurgent China with This Consumer ETF)
 
Investors seeking to ride out the slow recovery in the nation could focus on the following three ETFs. Investors should note that the trio have the top Zacks ETF Rank of ‘1’ or 2’ and are thus expected to outperform in the months to come as well.
 
iShares MSCI China Index Fund (MCHI)
 
This ETF follows the MSCI China Index, holding 139 securities in its basket. The fund has amassed over $1 billion in its asset base while charging 61 bps in annual fees.
 
The product has moderate concentration in its top 10 firms at 51.4% while sector exposure is tilted toward financials at 39.19%. The fund focuses on large cap securities, as these account for 81% of total assets while mid caps take the remaining portion with just 2% going toward small caps.
 
The ETF added 8.28% in the past 4 weeks. The fund has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating.
 
PowerShares Golden Dragon China Portfolio (PGJ)
 
Though not the most popular fund with AUM of little above $300 million, this fund is pretty liquid with average daily volume of more than 0.2 million shares a day. It tracks the Nasdaq Golden Dragon China Index and charges 70 bps in fees and expenses.
 
In total, the fund holds 67 stocks with large caps occupying a little under 70% of assets, with the balance going to mid caps (21%) and small caps (9%). Sector-wise, the product is highly concentrated and allocates over 56% of its portfolio to technology.
 
Consumer discretionary and health care take up 19% and 8% of PGJ, respectively. In terms of individual holdings, the ETF is somewhat concentrated in the top 10 firms, accounting for nearly 56% of total assets.
 
The fund added 5.6% in the last month, while it has delivered a spectacular 53.7% in the year-to-date time period. The ETF has a Zacks ETF Rank of 2 or ‘Buy’ rating. (see all the Asia-Pacific Emerging ETFs here).
 
Guggenheim China All-Cap ETF (YAO)
 
This fund has managed assets worth $55.9 million and charges 70 bps in fees per year from its investors. Holding 205 stocks, the ETF tracks the AlphaShares China All-Cap Index.
 
In terms of holdings, the product puts 43% of assets in the top 10 firms, suggesting modest concentration. One-third of the portfolio is tilted toward financials while information technology and energy form 17.07% and 12.72%, respectively, of the portfolio. Apart from China, the fund also allocates 27% of its holdings to the securities of Hong Kong.
 
The ETF delivered a return of 8.7% this year, while it added 11% in the year-to-date time frame.
 
The ETF also has a Zacks ETF Rank of 2 or ‘Buy’ rating.
 
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ISHARS-MS CH IF (MCHI): ETF Research Reports
 
PWRSH-GL DR HA (PGJ): ETF Research Reports
 
GUGG-CHINA AC (YAO): ETF Research Reports
 
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