This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

What Probe Means for China ETFs

An SEC probe into U.S.-listed Chinese firms could put some ETF investors at risk.

U.S. listed Chinese ETFs fall into one of two categories: ETFs that track Chinese ordinaries or ETFs that track U.S.-listed Chinese companies (American depositary receipts and other receipts).

While the investigation is just starting, it is likely that the ETFs that would be the most impacted would be funds that fall into the latter category.

For example, the PowerShares Golden Dragon Halter USX China Portfolio Fund (PGJ) is based on the Halter USX China Index, which is composed of the U.S.-listed securities of companies that derive a majority of their revenue from the People's Republic of China.

If the extent of the fraud suggested by this investigation turns out to be accurate, the SEC probe could conceivably impact the U.S.-listed Chinese firms at the core of PGJ. This kind of investigation could cause problems for PGJ's pricing and construction. Trading value could be negatively impacted, and investor fear could drive PGJ's trading value to a discount over the course of the investigation.

Until investors learn more about the extent of the SEC probe, it may be wise for ETF investors to avoid ETFs that track U.S.-listed Chinese firms.

It is less likely that ETFs that track Chinese ordinaries (stocks traded at exchanges in China and Hong Kong) would be impacted by this type of investigation.

It is important that investors check their portfolios and learn the difference between these two types of Chinese ETFs. While both types of these Chinese ETFs trade on U.S. exchanges, the big difference is that some of these ETFs track Chinese "ordinaries" (stocks traded on exchanges in China and Hong Kong) while some track U.S. -listed Chinese ADRs (Chinese companies with a dual listing on American stock exchanges). PGJ falls into the latter category, and the popular iShares FTSE China 25 Index Fund (FXI) the former.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
PGJ $34.50 1.80%
FXI $52.58 1.30%
AAPL $132.73 1.90%
FB $82.25 0.88%
GOOG $555.42 -1.70%

Markets

DOW 18,050.68 -29.46 -0.16%
S&P 500 2,114.36 -3.33 -0.16%
NASDAQ 5,074.0630 -18.0220 -0.35%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs