This article has a nice description of the three ETFs that focus on Chinese stocks.
FXI — FTSE/XINHUA China 25 Index: This market-cap based index consists of 25 companies representing the largest 25 Chinese companies comprising H Shares and Red Chips, ranked by total market capitalization. Index constituents are capped at 10% of the total index.
PGJ — Halter USX China Index: This modified market-cap Index consists of 103 companies whose common stock is publicly traded in the United States and the majority of whose business is conducted within the People’s Republic of China. The market-cap modification uses a formula that fundamentally prevents the largest market-cap companies from becoming too large a component of the index.
GXC — S&P Citigroup BMI China Index: This market-cap weighted index consists of 342 companies which are publicly traded and domiciled in China, but legally available to foreign investors.
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I would like to point out to you a better alternative to FXI for China investing: CAF. You see FXI hold mostly “State-Owned Enterprises” in China, which is not where the real growth areas are. CAF does a better job getting “inside” China.
Robert Hsu (China Strategy) says on FXI:
All of the 26 companies in the ETF are at least partially state-owned and controlled. When investors look past the momentum to a more fundamental analysis, they’ll see:
1. State-owned enterprises (SOEs) in general are in a significant decline, constituting 50% less of China’s economy than just eight years ago.
2. Most SOEs are poorly run, inefficient, and susceptible to corruption and political interference.
3. It is often difficult to trust the quality of earnings or management. FXI selects its components based mainly on size, not quality, which is dangerous over the long term.
Robert is recommending CAF. Just watch the trading price vs. the Net Asset Value (as it’s a Closed-End fund).
Before investing in China, check out the Saxo prediction of 0% growth, though: http://www.cnbc.com/id/28277894.
Thanks again!
–joe