PGJ: The other Chinese ETF
China is one of the few places I want to own stock these days. Why? Because I think their economy is most well-positioned to weather this storm. Chinese ETFs are down over 50% from their high last year. Buying opportunity or value trap? I’m going with buying opp. China is a rising global power, and they can tap significant public/private savings to stimulate their domestic economy during the downturn.
China’s average savings rate is around 50%. Most analysts view this as a point of weakness for China, because people aren’t buying stuff they don’t need with credit they don’t deserve. In China, people usually save to buy things they want. Analysts don’t seem to understand this alien concept. All they know is that it sounds boring, and slow! But there just might be something to it.
The two most popular Chinese ETFs are FXI and GXC. But both of these are very heavily weighted towards financials, 41% for FXI, and 30% for GXC. I already own enough banks in America, courtesy of my taxpayer dollars (poorly-run ones, whose financial results are unintelligible. Hmmm, maybe Chinese banks are worth a look too?). Anyways, I’d rather focus on China’s overall economy, particularly domestic spending and growth.
PGJ is a Chinese index fund that seems to fit the bill. It has only 6% exposure to financials, and has been around since 2004. It’s based on the 102 stocks of the Halter USX China Index. It’s comprised of Chinese companies who get the majority of their revenue domestically.
I’ll be averaging into a PGJ position over the next few months. The bottom line is that I want some more exposure to China, but not to banks and finance. Picking individual Chinese stocks is hard, I only own two: BIDU and AOB. So PGJ seems like a good index if you’re looking for non-financial diversification.
5 Comments
Elliottwave’s Asia service favors Shanghai Composite as the only Asian index that is on an uptrend.
Halter index uses mainland stocks. PGJ is a managed index with Halter picked stocks. Do you have any opinion on the ability to pick’em?
I have you on my RSS feed.
PGJ’s is based on the Halter USX China Index, so it’s not considered “actively managed” fund:
“The Halter USX China Index is comprised of companies whose common stock is publicly traded in the United States and the majority of whose business is conducted within the People’s Republic of China.”
For example, the S&P technically “picks” stocks for their indexes too (500, 100 growth, 100 small cap, etc). They set criteria, announce their choices, and people run funds mimicking them. Same with Halter and Invesco (as far as I know, please correct me if I’m wrong).
Here’s Halter’s methodology:
http://www.usxchinaindex.com/methodology.cfm
And here’s the fund holdings link:
http://www.invescopowershares.com/products/holdings.aspx?ticker=PGJ
Maybe not the ideal way to invest in China, but I like it the best out of the options I’ve seen. I do own some of both FXI and GXC, but my largest position is in PGJ. I’ll continue dollar-cost-averaging in.
While the Shanghai composite may be superior, I don’t know of a way to invest in that? Is there one? If not, we’re stuck with mutual funds, ETFs, and American-listed stuff for now.
Thanks for dropping by.
EWT The iShares MSCI Taiwan Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Taiwanese market, as measured by the MSCI Taiwan Index. Taiwan is on verge of a wave 1 as soon as the economy gets going.
Also found HAO “The Claymore/AlphaShares China Small Cap Index ETF (the “Fund”) seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an equity index called the AlphaShares China Small Cap Index (the “Index”). The Index is designed to measure and monitor the performance of the publicly-traded mainland China-based small capitalization companies.”(but has a 25% exposure to Hong Kong companies.)
There’s also Vanguards UGPIX which is a 2x. this is strictly for quick trades, and mid-trend, not a long term hold.
[...] notes that most Chinese ETFs are heavily invested in financials, as we noted about in this piece about PGJ when it was almost half what it trades at today (PGJ only holds 5% financials). Schiff [...]
[...] Chinese stocks earlier this year, when their valuations weren’t quite so lofty. In January I started buying PGJ (my favorite China ETF) around $13-$14. Since then it’s risen to $24, and like most Asian [...]