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Chinavestor ETF Spotlight: Market Vectors China ETF

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PEK_logo October 28, 2010 (Chinavestor) China isn't just a rapidly expanding economy. The world's largest country is also proving to be fertile ground for ETF issuers looking to offer U.S. investors various entry points into China's growth story. In the past year, the number of China-specific ETFs listed on U.S. exchanges has swelled, so let's have a look at the the newest offering: The Market Vectors China ETF (NYSE:PEK).
There are couple of traditional Chinese ETFs fund managers and individual investors have been accustomed to. The iShares/FTSE Xinhua China 25 Index Fund (NYSE:FXI) is one of the first and the best to track large cap Chinese stocks. Another popular one is the PowerShares Golden Dragon Halter USX China ETF (NYSE:PGJ), designed to track performance of U.S. companies conducting business in China. The Guggenheim China Small Cap ETF (NYSE:HAO) is one of the best proxies out there tracking the performance of smaller cap Chinese stocks.

The Market Vectors China ETF (NYSE:PEK), which is barely two weeks old, has carved out an interesting niche for itself by tracking the the CSI 300 Index, making the ETF the first to offer U.S. investors exposure to China's Shanghai and Shenzhen listed “A” shares. But be careful. China's “A” shares are still off limits to foreign investors and the the Market Vectors China ETF (NYSE:PEK) doesn't invest directly in these equities.

Rather, the ETF uses swaps and other derivatives to accomplish its investment objectives. That runs the expense ratio up and PEK checks in with a net expense ratio of 0.72%, which is about inline with the iShares/FTSE Xinhua China 25 Index Fund (NYSE:FXI) and the PowerShares Golden Dragon Halter USX China ETF (NYSE:PGJ). On the other hand, PKE's fees are well below those that come with the Guggenheim China Small Cap ETF (NYSE:HAO).

The following picture captured the position of the underlying components of each ETF this morning, before the NYSE/NASDAQ open. Charts and values reflect yesterday's events but the components reflect Asian prices before the U.S. open.

pre_20101028_etf

For example, the FXI table suggests that Huaneng Power Int. (HKG:0902) advanced 1.4% in Hong Kong, a component of the iShares/FTSE Xinhua China 25 Index Fund (NYSE:FXI), and a similar move is most likely to follow in New York on Thursday. Or that China Southern Airline (HKG:1055) fell 6.2% in Hong Kong, member of the Guggenheim China Small Cap ETF (NYSE:HAO, and a tumble is expected on the NYSE to follow today.

The Market Vectors China ETF (NYSE:PEK) is also heavily focused on financials as that sector accounts for more than 34% of the ETF's weight. Industrials at 17% are the only industry group getting a double-digit allocation in the ETF.

The Market Vectors China ETF (NYSE:PEK), like so many other China ETFs, has already proven volatile, trading in a range of almost $6 since its debut, but the fund has already attracted almost $30 million in assets, an impressive in such a short amount of time.



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