HoldingsTencent, Alibaba Group, China Mobile, Bank of China, and more
Managed byState Street Global Advisors
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.
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.
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.