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  • There Still Is Enough Latent Wealth In The China Consumer Space. 0 comments
    Mar 12, 2013 8:28 AM

    Goldman Sachs in one of its claims in the past argued that the combined BRIC economies (Brazil, Russia, India and China) have the ability to outperform the world's most affluent ones by the year 2050. China on the other hand achieved much of this claim before time primarily because of its large human resources which has not only aided in creating a robust manufacturing hub but also are the biggest buyers of the finished produce. The global speculation around Investments in The China Consumer sector are upbeat too in anticipation of more than 200 million of additional Chinese citizens getting aboard the middle class wagon by 2020. The current events of industrialization and liberalisation of consumer markets in China exist today to honour the rising domestic consumption in the country that will provide enough stimuli to its growth chart for the years to come ahead.

    The Chinese National Bureau of Statistics declared that in the first three quarters of the financial year 2012 the consumption sector (government + household consumption) contributed over half of this nation's economic growth, surpassing the share from investments. The report also affirmed that by 2020 the domestic consumption alone will account for more than 41% of the Nation's GDP.

    Foreign investors are naturally keen on tapping the emerging Asia and should consider the indirect exposure through China Consumer ETFs. These market traded funds fluctuate as per the spot prices and are attuned to valid benchmarks; most of these indices are NYSE listed and give out a broad exposure to largest and most liquid Chinese consumer equity.

    Furthermore existing SEC regulations provide for investor safety as they mandate the fund issuers to declare their assets on a real time basis. Along with tax benefits, investors also save on Stock wise the biggest asset is Great Wall Motor Company with 6.35% of holdings and other popular house hold names like Want China Holdings Ltd and Dongfeng Moto -H are the other top stocks with 5% allocation each. CHIQ ETF was introduced in November 2009 and its current asset corpus stands at $200 million as on 3/08/2012.

    The returns aren't shabby as well considering the last six months returns of Global X China Consumer ETF stand at 15%; the fund is a direct take on the asset class and invests in the China Consumer Equity.

    China has good trade understanding with the entire Americas, European and Australian economies and almost dominates neighbouring regions including the ASEAN bloc. Records of the past years show that its economic growth rate is three times that of the developed nations of the world and estimates highlight that more than half of its population is willingly accepting the urban lifestyle and giving up the rural trends.

    This indicates that there will be a shift in the culture of majority of natives; also these people would need newer ways of communicating and sheltering. There are thousands of locals, who will be the first time car owners and the penetration can be understood knowing that China is already ahead of all the other nations of the world in terms of cell phone usage and laptop sales.

    The expansion of sector will make goods available at affordable prices in this Asian nation which presents ample positive opportunities for the foreign investors who can acquire a basket of as much as 40 stocks with one single move through Chinese consumer funds.

    Chiq Global X China Consumer ETF [CHIQ] delivers as per the performance of the 40 stocks that make up the Solactive China Consumer Index post the annual expenses of 0.65%. Global X fund may be termed an apt Invest China Consumer Sector as it tries to cover all vital facets of this space. Retails is where maximum assets lie and accounts for about one fifth of the assets, Consumer Services is second with a close to 18% of the holdings.

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