Chindia Fund: A Lot To Love

May.21.07 | About: First Trust (FNI)

First Trust has introduced a new emerging market investment for the U.S. exchanges. It's not AustralAsia. It's not "BRIC." This time, we're getting the "ChIndia Fund." Specifically, we're getting the First Advisors LSE ChIndia Fund (NYSEARCA:FNI).

Investors will probably be intrigued... and why shouldn't they be? They became enamored with the iShares FTSE/Xinhua China 25 Index Fund (NYSEARCA:FXI). They adored the Claymore BNY/BRIC Fund (NYSEARCA:EEB) for gaining access to Brazil, Russia, China and India. Doesn't the regional play for 40% of the world's population make perfect sense?

Yes... and no.

The reasons that FNI may prove beneficial include: (1) First Trust has chosen highly liquid, well-established companies for the basket, not obscure up and comers from the East, (2) Investors are very likely to chase performance in the "IndiaChina" region, where economic growth is fast and furious, and (3) It's the only way at present to get the two countries... by themselves... in one investment.

However, there are significant dangers with the FNI basket, including: (1) a 37% exposure to information technology and a 14% exposure to telecom that may put one directly in the line of fire for a "tele-tech" implosion, (2) a price/book of 7 and price/earnings of 45 looks lofty in the best of circumstances, and (3) indirectly investing in the China/India boom via the tigers (Malaysia, Singapore, Taiwan, Korea) and the iShares MSCI Australia Fund (NYSEARCA:EWA) could prove more lucrative with less risk.

But hey... who can argue with the 1-week gains of 1% for the FNI "At that rate, it'll be another 50%+ annual gain," he said with a sarcastic smile.

FNI 10 day chart: