Halter Financial Group announced the launch of the USX India Index October 6th. In partnership with the AMEX stock exchange, Halter will also cooperate on the trading and development of an exchange traded fund and the trading and marketing of options and exchange-listed structured derivative securities based on the Index.
For investors, that means the first India ETF. Until now, US investors wishing to invest in India have had three options:
- Buy the stocks of individual Indian and Indian-oriented companies that trade in the US. (These are exactly the stocks covered by the India Stock Blog.)
- Buy the Morgan Stanley India Investment Fund (ticker: IIF), a closed-end fund with an annual expense ratio of about 1.4% that currenty trades at about a 3% premium to its net asset value.
- Buy the India Fund (ticker: IFN), a closed-end fund with an annual expense ratio of about 1.5% that currently trades at about a 9% premium to its net asset value.
The introduction of an Indian-oriented exchange traded fund will provide a important alternative for investors. If PowerShares introduces a new Indian ETF similar to its China ETF, the expense ratio will undercut the two Indian closed-end funds. The PowerShares Golden Dragon Halter USX China Portfolio (ticker: PGJ) has an annual expense ratio of 0.6%.
However, a new PowerShares Halter USX India Index ETF would be signficantly different from the two closed-end funds. First, the Halter Index contains only stocks that trade on US stock exchanges. And second, as a result of that, the Halter Index is far more concentrated than the two Indian closed-end funds, which contain many stocks that trade only in India.
According to Halter,
It [the USX India Index] is comprised of companies whose common stock is publicly traded in the United States and the majority of whose business is conducted within the Republic of India...
While there is strong demand for Indian equity, U.S. investors still seek and prefer the transparency offered with a U.S. listing. The listing of Indian companies in the U.S. is a growing trend and this index is intended to provide a valuable tracking and information tool for the investment community.
For a company to be included in the Halter USX India IndexSM it must have an average market capitalization of more than $50 million for the preceding 40 days, trade on the NYSE, Nasdaq or Amex® and must be approved by our Selection Committee.
No doubt some investors will find the trade-in-the-US criterion attractive. But the problem is this: with only 17 stocks currently in the index and all of them easy to purchase through any US online broker, investors planning to hold the index for a number of years will find it cheaper to purchase the stocks directly and save themselves the 0.6% annual expense fee.
Chart for the new index (ticker: HXI) below. Click to enlarge:
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