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Investment Profile

Consider this China ETF and Find Out What’s Driving this Epic Economic Power

Holdings

Tencent, Alibaba Group, China Mobile, Bank of China, and more

Managed by

State Street Global Advisors
Ticker: GXC

Risk Level

Aggressive

Risk Level

Aggressive

China is one of the world’s economic powerhouses.

Between 2000 and 2016, China’s economy grew to nearly $11.2 trillion from $1.2 trillion–a spurt of roughly 933%, according to data from The World Bank.

That’s an incredible run, and it’s positioned China to overtake the U.S. as the world’s largest economy in just over a decade, according to some economic forecasts. All of that growth could present opportunities for investors.

And you can chase this dragon on Stash.

Colossal China is what Stash calls the SPDR S&P China ETF (ticker: GXC), an exchange-traded fund from State Street Global Advisors that provides investors exposure to the companies powering one of the world’s economic superpowers.

What’s in the fund?

Colossal China is primarily made up of stocks from the technology and financial services industries, and allows you to invest in some of China’s biggest, specifically, those with market caps between $50 million and $100 million.

China’s financial services industry is quite different from the one in the U.S, which is typified by large Wall Street banks. The largest banks in China are government-owned enterprises. And you may not know it, but four out of the five largest banks in the world are Chinese.

The country also has a strange, touchy relationship with American tech companies. Websites like Google, Facebook, and YouTube can’t be accessed by ordinary citizens in China. As a result, China has developed a rival, homegrown tech industry.

Many of China’s leading tech companies are included in the fund, such as Tencent, which is China’s premier social media platform, similar in many respects to Facebook, with nearly a billion users. Tencent is the largest holding in Colossal China, representing nearly 15% of the fund’s assets.

Other top holdings include eCommerce giant Alibaba (10.6%), China Construction Bank Corp (5.66%), and Baidu (3.33%).

While the majority of the fund’s assets are based in China (92%), small percentages are located in Europe and North America as well.

Performance

The fund, which launched in 2007, is managed by State Street Global Advisors.

Year-to-date (as of June 2018), Colossal China’s return is 3.86%, according to Morningstar. That’s a fairly measured figure when you consider some of the wild returns the fund has posted in the past. In 2017, for example, the fund’s return was 51.67%, and in 2009, it had a return of 60.56%.

But it’s also had some down years, too. In 2016, returns were only 0.11%, and in 2015, the fund finished down -5.22%. And in 2008, the year of the financial crisis that started in the U.S. and then spread globally it posted a -48.77% annual return.

Similar funds

There are several similar funds out there for investors looking to invest in China. One such fund is the Global X China Consumer ETF (ticker: CHIQ), managed by Global X Funds.

CHIQ’s assets include companies like Alibaba, JD.com, and Melco Resorts & Entertainment, a Hong Kong company.

Year-to-date (as of June 2018), CHIQ’s return is 2.57%, according to Morningstar. In 2017, though, it’s annual return was 68.74%.

Risks and considerations

The lure of China’s growing economy can be intoxicating to investors, but every investment has risks. And that goes for Colossal China.

Colossal China’s most obvious risk is a lack of diversification — it’s almost entirely composed of Chinese stocks, which means that if China’s economy and markets tumble, the fund would likely take a blow.

China’s economy is an interesting case, too, as it’s been subject to various stimulus programs by the Chinese government in an effort to prolong growth and boost GDP figures. For example, China’s GDP growth in 2016 was 6.7%, far above the U.S., which the 1.5% posted by the U.S., according to data from the World Bank.

This lack of geographic diversification and asset allocation (100% equity, or stocks) could be one of the fund’s biggest potential downfalls. The potential volatility of foreign markets is also a big factor.

By Stash Team

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Disclaimers

The SPDR® S&P® China ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P® China BMI Index. The S&P® China BMI Index is a market capitalization weighted index that defines and measures the investable universe of publicly traded companies domiciled in China, but legally available to foreign investors. The China Index is “float adjusted”, meaning that only those shares publicly available to investors are included in the China Index calculation. The Fund invests by sampling the Index, holding a range of securities that, in the aggregate, approximates the full Index in terms of key risk factors and other characteristics which may cause the fund to experience tracking errors relative to performance of the Index. Foreign investments involve greater risks than U.S. investments, including political and economic risks and the risk of currency fluctuations, all of which may be magnified in emerging markets. Fund information reported as of February 20, 2017.

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.