Comparing Two ETFs for China

China's FIRST McDonald's (Photo credit: flickr.Marcus)

Although growth in China has slowed, the fact remains that it is the fastest growing economy and the second-largest country in the world. According to IHS Global Insight, China's GDP is predicted to grow about 7.8% this year. ETFs provide indexed, liquid exposure to China with low fees. However, they aren’t created equal and the tracking benchmarks have important differences that investors need to understand.

Comparing two popular ETFs for China is a good place to start.

The largest ETF to invest in China is the iShares FTSE China 25 Index Fund (NYSEArca: FXI) which holds 26 stocks, mostly large-caps and state run mega-cap companies. About half of the fund is dedicated to the financial sector, which limits diversity. With $4.53 billion in assets under management, the fund is the largest ETF that invests in China. A smaller ETF with around 179 holdings is the SPDR S&P China ETF (NYSEArca:GXC) with $783.8 million in assets. The fund is less expensive, with an expense ratio of 0.59%. GXC has outperformed FXI over the past year, over the past 5 years and year-to-date. ... Continue to read.

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