Global X Management Company is now two-thirds of the way through their rollout of six China sector ETFs with Friday’s (12/11/2009) introduction of Global X China Financials ETF (NYSEARCA:CHIX). The first two (consumer and industrial) were launched last week, technology came out earlier this week, and the remaining two (energy and materials) are expected soon.
The new ETF has an expense ratio of 0.65%, and the underlying index uses a multi-tiered capped weighting methodology whereby the percentage weighting of each constituent is capped at 10%. The excess weight is allocated proportionally to all other constituents and then capped again at 4.75%. The remaining excess weight is then allocated proportionally to all non-capped constituents.
This methodology should help provide a true sector representation without the extreme company overweighting present in the popular ETFs like the US Select Sector SPDRs. Only stocks which are tradable for foreign investors are eligible for inclusion. Index members must either be domiciled in China or have their main business operations in that country.
Global X China Financials ETF (CHIX) (CHIX summary) will track the S-BOX China Financials Total Return Index developed by Structured Solutions Ag for this ETF. The index fact sheet shows 25 constituents with four capped at 10% and seven subject to the 4.75% cap weighting. The four at 10% are Industrial and Commercial Bank of China, China Construction Bank, Bank of China, and China Life Insurance. The seven capped at 4.75% are Bank of Communications, Ping An Insurance Group, China Merchants Bank, China CITIC Bank, China Overseas Land & Investment, China Resources Land, and China Taiping Insurance Holdings.
Top industry representation according to the CHIX fact sheet includes banks 44.3%, real estate 31.4%, and insurance 24.4%. The prospectus dated 11/24/09 includes the energy and materials sector ETFs, which are expected soon.