Property Market is heating up in China yet again and it is directly due to the growing housing demand in the country. Most recent surveys on the realty space or the domestic consumption of China yield results that are positive enough to sustain a constant growth in the near term without being under stress from the otherwise gloom that lurks over the global capital markets. An interesting approach to harness the infrastructure hunger of this country is via investments in the China Materials sector. Foreign Investors seeking gains from the healthy infrastructure and domestic spending in China may consider indirect approach through the index bound China Materials ETFs.
Metals and Mining sector along with the Chemical Industry of China is directly responsible for maintaining an extensive raw material supply to a wide spectrum of Industries like manufacturing, construction and mining, thus providing the basis of holistic economic growth of a country. With the highest levels of consumptions for all major industrial raw materials, Chinese are among the biggest consumers of non ferrous metals, crude oil and account for almost 46% of the global steel consumption.
The eastern giant's industrial machinery accounts for the highest consumption and production figures of Coal in the world, although not surprising in a country where more than two thirds of electricity generation is dependant on this mineral.
The Republic of China is well placed in the world material markets and almost dominates it. As a largest producer of the crucial metals like Aluminum, Zinc and Steel, the manufacturing prowess of this future super power is easily understood knowing that one out of every two cement bags available in the world is made in China and is also unbeatable in the Rare Earth Element [REE] production.
Stark dependency on the material industry results in Indices designed to track the output growth being built around it. Global X China Materials ETF is attuned to the Solactive China Materials Index with FTSE being its primary exchange. The bench mark has a close to 97% of weight age in the mining and chemical equity and is a fair mirror to the current manufacturing trends in this Asian economy. The index has duly delivered 22.06 % half yearly returns as on 1/31/2013, some its related products have even given +27% returns during the same period.
An equity traded product [ETP] like CHIM ETF allows a broad exposure to diversified material equity of China as the assets include most key players from the domestic industry and it yields as per the performance of the above said Solactive Index. Other options in the market are from the I-shares and the Vanguard following their respective benchmarks but the dependence on the key metals and chemical industries is a common attribute among most funds in this asset class along with an annual expense ratio close to 0.70%. A diversified exposure, liquidity and good risk tolerance are among the unique features of ETFs as they can be traded during market's operational hours on the spot prices which are refreshed every fifteen seconds.
A good house is just one of the things that will be on the shopping list of millions of Chinese among whom most will be first time buyers for products like cars, computers, smart phones, credit cards and the list goes on. The Government of the country itself is keen on increasing the contribution of domestic consumption to the nation's Gross Domestic Product [GDP] and thus folks who have already or want to invest in the Material Industry of China may find themselves relieved in a pro trade economic environ where private ownership is encouraged among producer entities and those invested with top securities may get value growth over a long term as per simple market laws.
Global X China Materials ETF [CHIM] is bound to the performance of its namesake FTSE benchmark and delivers after the yearly expenses of 0.65%. The fund has outperformed the index with 27.28% six month returns as on 1/31/2013 and among the 29 securities that CHIM ETF holds, the top five stocks are Dongyue Group, Shanghai Petro Co., Yingde Gases, Citic Pacific and Angang New Steel Co. sharing a close to 5% of weight age each.