How to Get More Exposure to China

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Nov. 8 (Bloomberg) -- Bob Rice, general managing partner with Tangent Capital Partners LLC, discusses ways to invest in China Bloomberg Television's "Money Moves." (Source: Bloomberg)

Into china's first etf in new york.

This is a big bet.

Stockton -- stockgen is offering the one we are talking about.

The etf is new and gets to a wide range of stocks that had previously been unavailable to foreign investors.

Where are we now?

They are here.

There are some key things for investors to understand before you charge in.

The top line is great, ray e broad-based exposure to china, and this -- great, right?

Broad-based exposure to china that you would not otherwise be able to get, but, not so fast.

Let's take a look at a pie chart that shows you exactly what the makeup of this particular etf is.

We have tracked the cmi index.

Financials are a huge portion.

Industrials are another big chunk.

You are really only getting 12% aimed at consumer discretionary stocks through this etf.

Only 12%, and then i am looking at industrials and also energy and utilities.

How many of these things are privately owned, owned by public shareholders or state owned?

Now you're getting into the good questions, because a lot of these are in fact privately or state run enterprises.

And the truth is, state run enterprises are probably not being run for the benefit of foreign shareholders.

Something to be cognizant of.

Now take a look at the china a index.

Performance over five years has been pretty strong.

It has been decent, volatile, but everything has been volatile.

Since the crisis, it has gone up nearly as much is our market, as you can see.

If you take a look at how it is done vis-a-vis the other emerging market etf's, which is really the way you would want to compare it, it has not been done as well as you would expect.

It is significantly driving the emerging market index.

You think of china as this in norma's growth in emerging markets, primary -- enough is -- enormous growth in emerging markets, but this index does not have exposure to the more vibrant sections of the chinese economy.

We think of etf's as a fairly basic product, liquid, easy to buy, easy to sell.

Is this going to be the case when the underlying stocks are chinese?

What a superb question.

Passive management is really the way you want to approach an economy with this level of growth.

Picking winners and losers can be important.

I would pursue her -- i would prefer to see an active manager here.

The smart money, frankly, is going directly into chinese hedge funds and chinese funds of funds, so that you are picking up the expertise of local managers who are picking the winners and losers.

That make sense.

You have to know the right

This text has been automatically generated. It may not be 100% accurate.


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