The Big Picture For The Week of December 6, 2009

Earlier in the week I mentioned the new GlobalX China Industrial Sector ETF (CHII). I am favorably disposed to the concept of investing in China at the sector level and something to do with this sector would be one of a couple of very good choices, conceptually. I may end up buying CHII but other than the PowerShares Water ETF (PHO), which I bought during it's first week, I tend to give new funds a little time to ramp up. With funds like this that make a good first impression I will watch them for a while maybe learn a little about some of the companies in the fund and finally draw a conclusion at some point down the road.

CHII leans infrastructure. You may have noticed that IndexUniverse has mentioned a filing from Claymore for an China infrastructure fund, along with a tech fund and a consumer fund. In all of IU's articles about these funds they always mention an iShares fund that targets infrastructure in China but is only traded in Hong Kong.

So after reading the fourth mention of this fund I tried to find it to take a look at what was in there and with a little help from the google I found the iShares HK site and the holdings for the fund.

Apparently it is able to own A-shares and while some A-shares are listed in multiple places several of the stocks in this fund are only on the A-share market (or maybe the A-Share market and the B-share market) like Shanghai International Port, Shanghai Municipal Raw Water Co Ltd (Yahoo finance knows it as Shanghai Chengtou but only an A-share listing) and Shanghai International Airport.

Google Finance has some decent information on these companies (the links embedded above are to the corresponding pages for those stocks. In trying to decide how to allocate to China I think you need to decide what parts of the country (parts meaning sectors or themes) makes the most sense to you and then figure how best to access the space you think makes the most sense.

This particular A-share fund is not available in the US (yet?) but it is easy to look at the holdings and realize that it is heavy in transportation (like railroads, ports, airports, toll roads), certain utilities and it has a 9% weighting in a telecom stock. It is also easy to look at the holdings of CHII, realize it covers a lot of the same ground, some of the same names, with the biggest difference being CHII has a lot of exposure to cement stocks, and so owning both funds (were both available) probably wouldn't make sense.

However something that focused on wind or water could be different enough to be owned without a lot of overlap. The FT mentioned a wind turbine IPO just yesterday and these companies, some of them anyway, are going to be part of the solution and we will very likely see more ways to invest in them.

A point made here long ago and repeated numerous times is that the ETP industry will allow for more targeted exposure to various countries and themes allowing the opportunity to create more sophisticated portfolios (I think of more sophisticated as getting a better risk adjusted return, not necessarily a better nominal return).