China Real Estate ETF Plunge Revives Bubble Fears

| About: Guggenheim China (TAO)

An exchange traded fund tracking real estate stocks in China and Hong Kong fell 3% on Wednesday and recorded a new 52-week low. The ETF’s roughly 20% loss so far this year is a sign China’s property bubble is bursting.

ETF Spotlight on Guggenheim China Real Estate ETF (NYSEARCA:TAO), part of an ongoing series.

Assets: $27 million.

Objective: The Guggenheim China Real Estate fund tries to reflect the performance of the AlphaShares China Real Estate Index, which holds publicly-traded companies and real estate investment trusts (REITs) that generate a majority of their revenues from real estate development, management and/or ownership of property in China, Hong Kong and Macau.

Holdings: Top holdings include The Link REIT 6.91%, China Overseas Land & Inv 5.91%, Cheung Kong Holdings Ltd 5.15%, Wharf Holdings Ltd 5.15% and Henderson Land Development 5.13%.

What You Should Know:

  • Guggenheim Funds is the provider of the Chinese real estate ETF.
  • TAO has an expense ratio of 0.65%.
  • The fund is down 7.42% over the past month, 12.34% in the last three months and 17.35% year-to-date.
  • The fund holds 99.44% in the financials sector and 0.56% in the industrials sector.
  • Hong Kong makes up 72.29% of the fund and China is 27.71%.
  • TAO has 47 holdings.

The Latest News:

  • The ETF has experienced a sharp decline lately, which may be in response to a possible correction in China’s real estate market.
  • Billionaire property tycoon Vincent Lo, chairman of Shui On Land Ltd, believes the government is pushing banks to curb loans to real estate companies as a way to slow development and cool the housing market, reports Robyn Meredith for Bloomberg.
  • “We believe maybe the market is going to go through a tough time for another 12 to 18 months, and then I think it’s a good time to go and buy something,” Lo commented.
  • Lo, though, is still bullish on China’s residential and commercial property markets for the long term as more people move to cities.
  • “After years of housing prices gone wild, China’s property bubble is starting to deflate,” begins a Wall Street Journal story from the summer.

Guggenheim China Real Estate ETF (TAO)

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Max Chen contributed to this article.

Disclosure: None