Chartwell ETF China Pick Up 16.1% for Week
Chartwell ETF China Pick Up 16.1% for Week
By Carl Delfeld of ChartwellETF.com
China has proved skeptics like me wrong in weathering the global downturn surprisingly well. Growth has fallen to an annual rate of 6% but this is impressive given how much worse it might have done in light of a 44% plus fall in exports. In response, markets have really taken off since its infrastructure stimulus measures were announced earlier this year.
Below is the reasoning for our ETF Pick of the Week of last week, the Claymore China Small Cap (HAO), which is up 16.1%.
At this point, I am still wary of CAF which is trading at an unusually high premium to its net asset value but today recommend looking at HAO which targets small and mid cap companies listed on US exchanges. I like HAO for several reasons. HAO is largely populated by private companies, not owned or controlled by the government. In contrast, of the top 35 companies listed on the Shanghai exchange, 34 are controlled or owned by the central government. HAO trades at a multiple of seven times earnings, three times cash flow and 0.70 of book value. For large cap China ETFs like FXI, the top ten holdings can account for about 50% of total assets while for HAO the top ten represent just 17%.
I still recommend an 8% trailing stop loss and rate this as a high-risk position.
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