Capture Chindia With the First Trust Index Fund

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Includes: BIK, FNI, INP, PGJ
by: The Sun

There are many ways to invest in emerging markets, led by two most populous countries - China and India. You can buy them as part of the BRIC (Brazil, Russia, India, and China) countries with State Street’s SPDR S&P BRIC 40 ETF (NYSEARCA:BIK) that I have discussed before. Or you can invested in ETFs that are tailored for each individual country such as iPath MSCI India Index ETN (NYSEARCA:INP) and iShares FTSE/Xinhua China 25 Index (NYSEARCA:FXI) or PowerShares Golden Dragon Halter USX China (NASDAQ:PGJ).

The reason for having such investments in the portfolio can be clearly seen from the following chart, which shows 1-year performance of FXI, PGJ, INP, and S&P 500 (red line at the bottom of the chart). At a time when US stock markets are hammered by the subprime mortgage crisis, investors who look overseas for growth have been rewarded:

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In addition to the funds listed above, there’s another ETF that lets you invest in China and India at the same time. It’s First Trust ISE Chindia Index Fund (FNI), which tracks ISE Chindia Index.

FNI primarily invests in Chinese and India companies that are listed on US exchanges (American Depository Receipt, ADR). The fund selects top 25 companies from each country according to their market capital and three months average daily trading volume to make up the 50 stocks in the fund. As of August 31st, the fund’s top 10 holdings are

  • China Mobile (Hong Kong) Limited (NYSE:CHL)
  • PetroChina Company Limited (NYSE:PTR)
  • Aluminum Corporation of China Limited (NYSE:ACH)
  • China Petroleum and Chemical Corporation (Sinopec) (NYSE:SNP)
  • ICICI Bank Limited (NYSE:IBN)
  • China Life Insurance Co., Limited (NYSE:LFC)
  • Satyam Computer Services Limited (SAY)
  • Infosys Technologies Limited (NASDAQ:INFY)
  • CNOOC Limited (NYSE:CEO)
  • HDFC Bank Ltd. (NYSE:HDB)
The fund is rebalanced every 6 months. Currently it has a net expense ratio of 0.60%. Since inception on May 8, 2007, FNI has gained nearly 30% as of September 26th.