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A Hale And Hearty China Financial Sector Support The CHIX ETF

Jul. 25, 2013 12:34 AM ET
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Global X China Financial ETF (CHIX) provides an entrance to give way to the investors for offering an opportunity to access the movement in the Chinese's Banking Industry. The Chinese Financial System is much sturdier than it is depicted by the world economy. This index reflects the performance of the Financial Sector in China.

Of recently the Financial Sector has been facing certain tribulations such as the slight tightness in the Cash Zone. The cash crisis in the system was only due to the tightness in the cash market owing to the People's Bank of China (PBOC). But that does not signify that the overall structure of the financial system is not healthy. The China Financial Fund portfolios have been doing very well recently. The only way to get an exposure to the Chinese Financial Market is the ETF way and this CHIX ETF is doing remarkably well in the investor's brand wagon.

The downfall of the GDP of China is a result from the tighter lending of funds from banks. These new Banking policies are being strictly implemented for the Real Estate and the Non-productive sectors. But it is positively predicted that a rise in the GDP is anticipated. The sacrifice of the slowing down in the expansion is primarily targeted to be able to focus on the much needed change in the Structural reforms. There has been a decline in the growth of China's Industrial Output due to the change in the reforms, but the economy is definite to settle down at a remarkably fast rate.

Commercial Banks dominate the Financial Sector of China. Recently there was a move to edge the Short term investment products by the China Banking Regulatory Commission. This has left a positive mark on the investors. The CHIX ETF is being seen as a meaty loaf for the foreign investors. This whole restructuring will make the funding structure and capital quality much more stable and stronger. The Central Bank of China has encouraged a sharp increase in the interest rates on the borrowings from one bank to another. So the Financial Sector sees a hike in the prices of borrowing in the economy. Three fifths of the total credit given to the private sector comes from the Banks in China. Half of the loan market is controlled and dominated by five banks in China. These banks are majorly controlled by the state government. Thus banking decisions are influenced by the Central Government.

A multiple policy change is being implemented by the new political Chinese leadership. "Shadow Banking" requires an immediate inspection as China sees a disproportion of the funding. Majorly the state -owned enterprises are given preference to, than the privately owned businesses, despite the analysis of reports that suggest that these small privately owned businesses provide the momentum and inject the medicine for its growth. In turn these private businesses are starved of their funds which leave the whole scenario as neither practical nor fair. Other ways are required to be found to channel the funds to more important companies of the economy. This has resulted in the recent tightening of cash availability for borrowing in the Financial Sector, and funding more expensive.

The nutshell of the whole scenario is that China has the capability of working for a desired structural change in its economy with the help of the new political leadership which has signified the importance of the required change. The anticipatory evolution of the nation in terms of greater economic sophistication lures all eyes on this economy, though it is a little too early to say but yes the China financials ETF are expected to boom.

Global x china financials ETF [CHIX] delivers as per the performance of the benchmark after annual expenses to the tune of 0.65%. The top 5 assets Holdings for CHIX ETF are: IND & COMM BANK OF CHINA, BANK OF CHINA LIMITED H, CHINA CONSTRUCTION BANK, CHINA OVERSEAS LAND & INV and BANK OF COMMUNICATIONS as on 7/22/2013.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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