Claymore's most recent exchange-traded fund [ETF] has been eagerly awaited. Some time ago, the fast-growing ETF company filed for an ETF covering China's real estate market. Today, the Claymore/AlphaShares China Real Estate ETF launched on the NYSE Arca platform under the symbol "TAO."
The fund is the first to combine two very hot areas of investment under one umbrella. China, of course, has been undergoing spectacular growth these past few years. At the same time, international real estate has become an area of particular interest to U.S. investors, in part because of the subprime mortgage problems in the United States.
TAO seems to combine the best of both worlds. As it develops, China's real estate markets will see more and more demand. It may be a big country, but it is also a largely rural one, with much of its business activity concentrated in some very congested cities. Real estate will therefore be at a premium as businesses struggle to gain footholds around those industrial centers.
"The momentum of China's real estate expansion has been fueled by a growing population and rapid urbanization," says Burton Malkiel, chief investment officer of AlphaShares, Inc. "As more Chinese residents move from rural areas to the cities to seek greater economic opportunity, the demand for housing and office space will increase dramatically. Many of the buildings they'll live and work in haven't yet been built."
And Malkiel should know what he's talking about. In addition to A Random Walk Down Wall Street, he is the author of the recently published From Wall Street to the Great Wall: How Investors Can Profit from China's Booming Economy.
The AlphaShares China Real Estate Index tracks publicly traded companies and REITs that engage primarily in the development, management or ownership of real estate properties in mainland China, Hong Kong and Macau. It includes only shares available to foreign ownership such as those listed in Hong Kong or New York; China's A-shares and B-shares are excluded from the index. Eligible companies must have total market capitalizations of at least $500 million to be included in the index.
Currently the index tracks 49 companies with an average market cap of $14.9 billion. The top 10 companies—which include the likes of Sun Hung Kai Properties, Cheung Kong Holdings Ltd., Henderson Land Development Co. Ltd. and Hang Lung Properties Ltd.—represent roughly 50% of the total holdings.
TAO has an expense ratio of 0.65%.
Written by Heather Bell
