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  • Chinese Industries Continue To Grow- With Or Without You 0 comments
    Jan 10, 2013 12:57 AM

    Chinese markets have shown a bright performance lately, Across the Dragon-land,major manufacturers have posted good annual results, bucking a slow global trend in 2012. Investments in the China Industrial Sector have seen a visible increment and the recent boost comes in the wake of state's announcements of twelfth five year plan. The scheme which targets at construction of more than 30 million new housing units by 2015, will add significantly to the internal industrial demands and furthermore the government is also keen on increasing its GDP dependence on the Industrial sector and the domestic consumption capacity of the nation. These developments have stirred the interest among foreign investors and those keen on exposure to this asset class are choosing products like Global X CHII ETF over direct equity investments, indicating a still persisting risk aversive sentiment for the Chinese capital markets but unknowingly triggering investments in the country specific equity traded funds or ETFs which is now a very evident investment habit among Americans.

    The trend in emerging nations indicates an upward spending move to enhance one's overall wellbeing. The demand for food products has tremendously increased as these developing countries have become wealthier. With the rise in middle class segment, the demand for construction equipment for building infrastructure is simultaneously and rapidly on the rise. In developed nations too there is an extensive requirement for construction material as the old infrastructure is replaced with new construction. The economies with a sound and strong industry base will definitely see higher levels of growth and face lesser worries in times of economic crisis.

    One such nation is the Chinese Republic where Industrials account for 46.9% of the total GDP. The superlative growth that the Asian Dragon has displayed in the last decade has made it the second biggest economy just behind the mighty USA and well past the Great Britain. It is today, the largest exporter-country in the world, easily surpassing Germany. China's huge production of industrial goods, automobiles and electronics ramifies into its economic success and diversification of industrial sector which will continue to grow further due to the rising domestic consumption.

    For the year 2013 it has been predicted that Chinese Industrials will follow a pro-growth policy and will grow at an 8%+ rate.According to IHS Global insight, China will be the number one manufacturer in the world overtaking United States in 2015, even the Chinese Purchase Managers Index {PMI} is valued at +50 integer denomination indicating a clear year on year increase in the manufacturing output of the country.

    If investors lack necessary research - knowledge and time to track the industrial stocks then they must ponder upon options such as sector specific ETF, which will offer a more targeted and a broader engagement with in the respected sector. The Global X China Industrial tracking the performance of Solactive China Industrials Index reflects a fair valuation on to the strong industrial division of China. The bench mark which mostly includes large cap companies involved in engineering, construction, industrial paraphernalia and transportation sector enables a stable anchorage that should be a relief for investors in general.

    The Solactive benchmark uses a very systematic sector wise approach when it comes to acquiring assets:

    Industrial Equipments is the heaviest sector with 33.7% of the total held assets comprising of Large Cap stocks in this primary business.

    Building Materials comes at second with a close to 26.41% dedication, which is an apt choice for a country where state along with the private sector is aggressive with new constructions of roads, bridges, housing and commercial projects. In fact the Chinese government is now famous for building bridges and roads to places where they might not even be used.

    Transportation along with Engineering and Construction sector accounts for about 39.8% of equities that make up this Index.

    Global X China Industrials ETF [CHII] mirrors the name sake Solactive benchmark. CHII ETF operates at an expense ratio of 65 basis points and its top five holdings are China National Building MA-H [5.44%], Weichai Power Company Ltd.-H [5.12%], China Railway Group Ltd. [5.06%], China Railways Construction [4.76%] and Anhui Conch Cement Ltd. [5.38%] among other stocks

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