CHIQ: Could Be A Big Winner For China Investors

seekingalpha07-15

Bullish on China's markets due to potential momentum even if the economy doesn't reaccelerate.MSCI China Consumer Discretionary ETF offers exposure to growing middle-class spending on various goods....

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Alibaba Group is a dominant force of the Chinese consumer scene and one of the world’s largest retailers by sales. BYD is a vehicle manufacturer. JD.com is the biggest supplier of consumer goods to China’s burgeoning middle-class, whose merchandise is routinely delivered to their doors. And Li Auto Inc is a leading electric vehicle manufacturer. Sector Breakdown The breakdown is what you’d expect for the consumer discretionary sector of any economy. Hotels, restaurants, and leisure making up over a third of the fund, followed by automobiles and retail at around 20%. An improving Chinese economy should help consumer spend more at","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","BK4550":"红杉资本持仓","FDN":"First Trust Dow Jones Internet I","BK4504":"桥水持仓","ISBC":"投资者银行","BK4211":"区域性银行","CHIQ":"中国消费者指数ETF-Global X","MCHI":"中国ETF-iShares MSCI","BK4585":"ETF&股票定投概念"},"translate_title":"CHIQ：可能成为中国投资者的大赢家","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CHIQ":1,"ISBC":1,"MCHI":1,"FDN":0.9},"content_text":"Bullish on China's markets due to potential momentum even if the economy doesn't reaccelerate.MSCI China Consumer Discretionary ETF offers exposure to growing middle-class spending on various goods.The fund tracks MSCI China Consumer Discretionary 10/50 Index, providing targeted exposure to the consumer discretionary sector in China.   Oleksii LiskonihChina. It’s been a terrible stock market. A terrible economy. And yet, at some point, all bad news is priced in. I’m increasingly bullish on China’s markets, and think that even if the economy doesn’t reaccelerate but has at least bottomed, there’s a lot of room for momentum. If I’m right, a good way to play the country’s equity market is through their consumer discretionary sector. The country’s burgeoning middle class is increasingly spending on travel, leisure, apparel, cars and a wide array of discretionary goods. And the MSCI China Consumer Discretionary ETF (NYSEARCA:CHIQ) is a good way to play it. This ETF takes a focused play on the world’s second-largest economy, providing pure-play exposure to a representative portfolio of the biggest consumer discretionary stocks in China. If consumer trends define the future of the economy in China, then owning this piece of the nation’s economic structural shift could be a critical part of a forward-looking portfolio. The fund is designed to track the MSCI China Consumer Discretionary 10/50 Index, which includes large- and mid-cap equities in China that represent the consumer discretionary sector of the economy, as defined by the Global Industry Classification System (GICS). The universe of the index is composed of China A, B and H shares, as well as Red chips, P chips and Foreign listings. Importantly, the index uses an absolute 10/50 concentration rule that caps the share of any group entity at 10 percent and limits the aggregate share of all entities at more than 5 percent to 50 percent, thereby reducing concentration risk without sacrificing a targeted exposure to the consumer discretionary theme. A Look At The Holdings The portfolio has 77 positions, and some high concentration, with the largest holding making up nearly 10% of the fund.   globalxetfs.comWhat do these companies do? Meituan enables one-stop shopping and delivery via a full-stack platform covering food delivery, consumer goods retail and value-added services. Alibaba Group is a dominant force of the Chinese consumer scene and one of the world’s largest retailers by sales. BYD is a vehicle manufacturer. JD.com is the biggest supplier of consumer goods to China’s burgeoning middle-class, whose merchandise is routinely delivered to their doors. And Li Auto Inc is a leading electric vehicle manufacturer. Sector Breakdown The breakdown is what you’d expect for the consumer discretionary sector of any economy. Hotels, restaurants, and leisure making up over a third of the fund, followed by automobiles and retail at around 20%. An improving Chinese economy should help consumer spend more at the margin, and potentially result in multiple expansion across the board. globalxetfs.comPeer Comparison The question here is: Do you want access to China’s markets to be so sector specific? Or broad? One broad fund to compare this fund to is the iShares MSCI China ETF (MCHI). This ETF offers global exposure to the Chinese equity market, with a focus on more than just consumer discretionary. CHIQ offers greater focus, but MCHI might be more to many investors’ taste. When we look at the price ratio of CHIQ relative to MCHI, we find that CHIQ has outperformed since 2020, but largely been in a sideways relative pattern for MCHI for the better part of 3 years. stockcharts.comPros and Cons On the positive side, CHIQ provides targeted exposure to China’s rapidly developing consumer discretionary sector, one of the fastest growing parts of the economy and an increasingly important attraction for western consumer goods makers. It’s efficient, fairly diversified, and likely under-owned given sentiment being poor for a long time when it comes to investing in China. The downside? It’s…China. That means the fund will be vulnerable to the geopolitical shenanigans and regulatory headwinds that have held Chinese equities in the past. In addition, although the consumer discretionary sector may have an attractive growth profile, it can also be susceptible to shifts in consumer sentiment, economic growth and consumer trends; a slowdown in China’s economic growth or a decline in consumer confidence could negatively impact CHIQ’s underlying holdings. Finally, a price to pay attention to is the expense ratio, at 0.65 percent, which some might deem relatively high when compared with other broad market-cap-weighted ETFs. But to gain targeted exposure to a part of the economy in the dynamically changing market that is China, that price may be well worth it to investors trying to cash in on the land of discretionary consumption. Conclusion  Overall, I think the MSCI China Consumer Discretionary ETF is worth considering. CHIQ is an ideal vehicle for investors seeking exposure to China’s consumer discretionary sector, and its forward-looking metric aligns with structural changes in the nation’s economy. Moreover, with disposable income continuing to rise, discretionary spending patterns changing and entire sectors advancing, the companies in CHIQ’s portfolio stand in the vanguard of the ongoing mega-trend: the rise of the consumer in China. From e-commerce titans to next-generation tech hubs, from electric vehicle makers to domestic brand leaders, CHIQ gives you exactly what you want if bullish on China consumers.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.28.1","shortVersion":"4.28.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2451117226"}