Monday, June 1, 2009
Stock In Focus: iShares FTSE/Xinhua China 25 Index ETF (FXI)
Looking at the chart of the China ETF or FXI (Exchange Traded Fund-which is like a mutual fund of Chinese stocks that are traded like stocks and have low fees). FXI has been on an uptrend since March of this year. FXI has risen by more than 50% since the beginning of March.
MACD is positive and has broken above its signal, which is bullish for FXI.
The slow stochastic is at 83.166 which is fast approaching overbought levels. So there may be a correction during this week.
However the positive manufacturing report for China released last week added to the overall global investor optimism has meant that FXI may continue its uptrend. Analysts have signified that China may experience a quicker recovery than the rest of the world due to its strong economic fundamentals and a strong financial system including banks with good balance sheets.
The following are some information on the China ETF.
FXI seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/Xinhua China 25 index. The fund generally invests at least 90% of assets in securities of the Underlying index and in depositary receipts representing securities of the Underlying index.
The Underlying index consists of 25 of the largest and most liquid Chinese companies. It may invest the remainder of assets in securities not included in its Underlying index but which BGFA believes will help the fund track the Underlying index. The fund is nondiversified.
Total Expense Ratio 0.74%
Annual Holdings Turnover 24%
Total Net Assets 7.07Billion
OVERALL PORTFOLIO COMPOSITION (%)
TOP 10 HOLDINGS ( 60.42% OF TOTAL ASSETS)
Bank of China 7.17% of total assets
BOC HONG KONG HLDG HKD5 4.18% of total assets
China Life Insurance Company, Ltd. 8.86% of total assets
China Mobile Ltd. 9.17% of total assets
China Petroleum & Chemical Corporation 4.13% of total assets
China Telecom Corporation Limited 4.49% of total assets
CHINA UNICOM 4.21% of total assets
CNOOC, Ltd. 6% of total assets
Industrial & Commercial Bank of China 8.14% of total assets
PetroChina Company, Ltd. 4.07% of total assets
Average Price/Earnings 10.89
Average Price/Book 1.37
Average Price/Sales 1.18
Average Price/Cashflow 3.39
SECTOR WEIGHTINGS (%)
Industrial Materials 4.22%
Business Services 8.27%
Financial Services 46.26%
A financial analyst Larry Edelson gave reasons why he was bullish on China:
A) Beijing now has nearly $2 trillion in cash reserves , more than any other country on the planet, giving it plenty of ammunition to protect its economy.
B) China's banks are now the strongest in the world , with capital ratios far above almost all other large banks in the world and debt levels that are far lower (even allowing for an inevitable increase in non-performing loans).
C) Beijing has recently committed to spending over $600 billion — equivalent to nearly 30% of GDP — on infrastructure, rural development, healthcare, education, and housing. More spending is likely to be announced soon.
D) Interest rates have been cut five times already and will likely be cut further , while bank reserve requirements have also been lowered.
E) Taxes have been slashed on housing, personal income, sales and value added taxes — plus, tax rebates for exporters have just been upped as of December 1.
F) Downpayments on housing have been reduced from 30% to 20%, which will boost domestic spending throughout the economy.
G) Beijing just announced it will pump up money supply to a minimum of 17% growth in 2009.
H) Many great Chinese stocks are now trading at very cheap valuations, as low as 2 times earnings!
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To appreciate beauty; to find the best in others; to leave the world a bit better whether by a healthy child, a garden patch or a redeemed social condition; to know even one life has breathed easier because you have lived. This is to have succeeded.
Ralph Waldo Emerson