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.






