Emerging Global Shares, an exchange traded fund provider that specializes in emerging market sector plays, is out with a first-of-its kind fund aimed at capitalizing on the growth in Chinese infrastructure.
The Emerging Global Shares China Infrastructure (NYSEArca: CHXX) began trading this morning. Richard Kang, Emerging Global Shares’ Chief Investment Officer and Director of Research, points out that demand for infrastructure is constant. “When you flush that toilet, the water has to go somewhere.”
The Chinese government also has a vested interest in building and maintaining the country’s infrastructure: when there are roads, runways, electric power, clean water and more, social unrest declines. “The only way to keep people happy is to make sure the basics are there,” since voting out the ruling party isn’t an option, Kang says.
CHXX is diversified across a number of sectors – not just utilities. The fund has exposure to wireless telecommunications, water utilities, power producers, metals and mining, transportation, among others. Kang says it’s a way to play China’s increasing need for a working power grid and efficient transportation as corporations become stronger and consumers earn more spending money.
Although China boasts large, modern cities like Shanghai and Beijing (in fact, at least 10 of China’s cities have a population in the 6-10 million range), many of these cities have subway systems with just two or three lines. Therein lies the opportunity.
Meanwhile, the country still struggles with concerns over an asset bubble and is taking steps to mitigate these issues. China’s government warned that China’s asset prices could fluctuate dramatically if global stimulus policies are reduced, reports Don Dion for TheStreet. The Chinese government probably won’t extend its own stimulus measures because of asset bubble concerns.
Earlier this week, China’s January economic performance report revealed that Chinese exports increased by 21% and imports by 86% from a year earlier. The jump in imports reflected the growing consumption as a result of government stimulus and higher personal incomes. Furthermore, auto sales surged 116% in January as compared to a year ago.
The Chinese government is thinking about raising the minimum wage as an alternative to appreciating the yuan. Higher wages could put upward pressure on the currency but the government thinks that stimulating the domestic economy is more urgent.
For more information on China, visit our China category.
- Shares FTSE/Xinhua China 25 (NYSEArca: FXI)
- SPDR S&P China (NYSEArca: GXC)
- Claymore/AlphaShares China All-Cap (NYSEArca: YAO)
- Claymore/AlphaShares Small Cap (NYSEArca: HAO)
- PowerShares USX Golden Dragon Halter (NYSEArca: PGJ)
Max Chen and Heather Hayes contributed to this article.