Investing in emerging markets has become an increasingly popular choice for many as these nations generally have higher growth prospects, lower levels of debt, and more favorable demographic profiles than their developed market cousins. However, a broad risk off trade has hit stocks in these countries extremely hard as investors the world over look for lower risk options in more familiar regions of the world. This has been especially the case in the world’s top emerging market of China. The nation has been in focus as of late for a number of reasons, all of them bad, as many are beginning to grow worried that the country is going to have a hard landing.
First, inflation remains relatively high and a housing bubble continues to be a problem, as many homes are not affordable to the average Chinese citizen in the country’s largest cities. Beyond this, worries over growth in the nation are also beginning to cause some level of concern as well. The latest GDP growth report for China came in at ‘just’ 9.1% which, while still at a high level, came in below expectations which called for growth of 9.3% in year-over-year terms. Furthermore, it represents a continued decline in growth rates for the country as the year-over-year growth was 9.5% in the second quarter and 9.7% in the first quarter of this year, suggesting declining prospects for the nation heading into 2011′s home stretch [Emerging Market Investing: Seven Factors To Consider].
Thanks to these recent events, one of the more unique China ETFs currently on the market today, the Market Vectors China ETF (PEK) looks to be in focus. The product is different in that it follows the CSI 300 Index, which consists of 300 A-Shares stocks listed on the Shenzen or Shanghai stock exchanges. While this may sound similar to many other products in the space, it is actually unlike anything else currently offered in the American market. That is because PEK tracks this index by investing in swaps and other derivative instruments and it doesn’t actually buy up A-Shares. In fact, A-Shares are pretty much closed off to foreign investors and are only available to a select few that have been approved for the ‘Qualified Foreign Institutional Investor’ program [see A Closer Look At The China A-Shares ETF].
Investing in emerging markets has become an increasingly popular choice for many as these nations generally have higher growth prospects, lower levels of debt, and more favorable demographic profiles than their developed market cousins. However, a broad risk off trade has hit stocks in these countries extremely hard as investors the world over look for lower risk options in more familiar regions of the world. This has been especially the case in the world’s top emerging market of China. The nation has been in focus as of late for a number of reasons, all of them bad, as many are beginning to grow worried that the country is going to have a hard landing. First, inflation remains relatively high and a housing bubble continues to be a problem, as many homes are not affordable to the average Chinese citizen in the country’s largest cities. Beyond this, worries over growth in the nation are also beginning to cause some level of concern as well. The latest GDP growth report for China came in at ‘just’ 9.1% which, while still at a high level, came in below expectations which called for growth of 9.3% in year-over-year terms. Furthermore, it represents a continued decline in growth rates for the country as the year-over-year growth was 9.5% in the second quarter and 9.7% in the first quarter of this year, suggesting declining prospects for the nation heading into 2011′s home stretch [Emerging Market Investing: Seven Factors To Consider]. Thanks to these recent events, one of the more unique China ETFs currently on the market today, the Market Vectors China ETF (PEK) looks to be in focus. The product is different in that it follows the CSI 300 Index, which consists of 300 A-Shares stocks listed on the Shenzen or Shanghai stock exchanges. While this may sound similar to many other products in the space, it is actually unlike anything else currently offered in the American market. That is because PEK tracks this index by investing in swaps and other derivative instruments and it doesn’t actually buy up A-Shares. In fact, A-Shares are pretty much closed off to foreign investors and are only available to a select few that have been approved for the ‘Qualified Foreign Institutional Investor’ program [see A Closer Look At The China A-Shares ETF].
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