Global X Management Company rolled out Global X China Energy ETF (CHIE) today (12/16/2009), its fifth of six planned China sector ETFs. The first two (consumer and industrial) were launched two weeks ago, technology and financials were released last week, and materials is expected before year end.
For the purposes of this ETF, the “Energy Sector” includes companies whose business operations are focused on the production and/or distribution of energy, both conventional and renewable, or the production and/or mining of commodities used in energy production. Therefore, companies that are often classified as utilities or materials (coal mining) are included.
CHIE 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 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 Energy ETF (CHIE) (CHIE summary) will track the S-BOX China Energy Total Return Index developed by Structured Solutions Ag for this ETF. The index fact sheet shows 24 constituents with four capped at 10% and five subject to the 4.75% cap weighting. The four at 10% are CNOOC (CEO), China Shenhua Energy (OTCPK:CSUAY), China Petroleum & Chemical (SNP), and PetroChina (PTR). The five currently capped at 4.75% are Beijing Enterprises Holdings, China Resources Power Holdings, Huaneng Power International (HNP), China Coal Energy (OTCPK:CCOZF), and CNPC.
Top industry representation according to the CHIE fact sheet (pdf) includes oil & gas 43.9%, alternative energy 18.4%, electric 16.0%, coal 14.8%, and equipment & services 7.0%. The prospectus (pdf) includes all six Global X China sector ETFs.
Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.