In an ETF marketplace dominated by large-cap offerings like iShares FTSE/Xinhua China 25 Index (FXI), and small-cap funds like Claymore/AlphaShares China Small Cap Index ETF (HAO), YAO tries to achieve diversification.
YAO joins a pair of existing Claymore China funds, including HAO and Claymore/AlphaShares China Real Estate ETF (TAO). FXI, the iShares behemoth, dominates when it comes to market share, with nearly 22 million shares changing hands each day.
FXI, however, takes a limited market-cap-weighted approach. Launched in October 2004, FXI seeks to track the 25 largest companies in the Chinese equity space, many of which are government-owned. Top components include China Mobile (CHL), China Life Insurance (LFC) and Cnooc (CEO). Sector allocation is heavily weighted toward financials, which comprise more than 45% of the fund's underlying assets and makes FXI's sector exposure lopsided.YAO's portfolio includes many of the same government-controlled giants as FXI, but also offers exposure to smaller-cap equities. While 53% of the YAO portfolio is currently dedicated to large-cap firms, mid- and small-cap companies comprise 33% and 10% of the portfolio, respectively. The resulting mix in YAO's underlying basket offers a slightly more balanced view when it comes to sector allocation. Financials make up 34.87% of the portfolio, while energy and information technology make up 17.89% and 11.61%, respectively. Investors will still be weighted toward financials, but not cornered by a strong financial sector bias. When it comes to sector balance, YAO's biggest competitor will likely be the SPDR S&P China ETF (GXC), which focuses on large-cap China firms. GXC's top three sector holdings are also financials, energy and telecommunication, with 33.22%, 19.24% and 12.80% allocations respectively.