China ETFs

I have been writing about China as an important investment destination since I started the blog. Any posts along these lines in the past have been focused on a longer term view in terms of many years. The simplest description of this theme is that China will be much more economically relevant in coming years. This has been occurring steadily and I believe will continue for years to come. Anyone may or may not be able to guess what more economically relevant will look like but that is what's happening.

There are two ETFs that I am aware of; iShares FTSE/Xinhua China 25 Index Fund (FXI) and the PowerShares Golden Dragon Halter USX China Portfolio (PGJ).

Obviously Golden Dragon has lagged FXI badly. There has been some attention paid to the odd mix of stocks held in PGJ. I have previously disclosed owning FXI personally (for a little over a year now) and that quite simply I preferred it to the PowerShares product because there were fewer moving parts. With these kinds of emerging markets and I'll throw in the frontier markets while I'm at it I want exposure to the big phone company, the big bank, the big oil company, the big food company, the big...eh well you get the idea.

The PowerShares fund has some weird stuff including a biotech stock and a ring-tone company. I haven't really analyzed PGJ since it first listed beyond knowing its holdings are more complex. WisdomTree has filed for the WisdomTree China Total Dividend Fund which could turn out to be a better mousetrap. I think PowerShares has single country funds in the works based on Robert Arnott's fundamental indexing; maybe they will bring another China fund there. StateStreet just listed a couple of Japan ETFs; maybe they will come with a China fund too.

Any of these could be better than FXI. Normally I might say it doesn't matter what you own because even if you pick poorly you can capture some magnitude of a big move. Well either PGJ is the exception that proves the rule or it shows that top down management is not infallible.

On a different note I am very excited about the Maui Invitational that gets underway in a few hours. My friend Russell asked me if I was going this year. Well maybe next year but Joellyn has said we are not going to Hawaii to sit in a gym and watch basketball. She does have a point.