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

Energy ETF May Provide Safe Exposure to China

NEW YORK ( TheStreet) -- The China investment theme has taken a bashing lately, perhaps deservedly so as there are plenty of questions about the country's economic growth, its banks and its real estate sector.

There are risk factors, but there always have been.

What might be occurring is that investing in China is no longer as simple as it was five or six year ago, when all one had to do was buy iShares FTSE China 25 Index Fund (FXI).

There are still some segments of the Chinese economy that can do well even if China's GDP growth declines significantly from current levels around 8%.

ETF provider Global X offers a suite of six Chinese sector ETFs including the China Energy ETF (CHIE). The energy sector can continue to do well.

The thesis for buying this sector in China has been increasing demand. Eight years ago, per capita oil consumption in China was 1.25 barrels, vs. about 25 barrels in the U.S. Today per capita oil consumption has grown to 2.5 barrels and should continue to grow as the population continues to urbanize. Realistically, consumption in China will never approach that of the U.S., but it doesn't have to for the sector to continue to be viable.

Here's another way to think about it: China's population is four times that of the U.S., but China consumes only 8.2 million barrels of oil a day, about one-third of U.S. consumption. The Chinese oil majors are investing around the world because they believe domestic demand will continue to increase.

In the past, the biggest drawback to CHIE was the 9%-10% weighting in Chinese solar stocks.

I've written before that solar energy may be important but it is not yet economically viable. Solar stocks have declined sufficiently to reflect this reality.

Year to date, the solar stocks in CHIE have had declines ranging from 11%-60%. The one exception is Trina Solar (TSL), which is down less than 1%.

As a result of these declines, solar now makes up only 6.5% of the fund and is less likely to be a drag on returns going forward. The shrinking of the solar stocks' weighting in the fund is an indication that these stocks have underperformed and have hurt returns.
1 of 2

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
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
FXI $34.95 2.00%
CHIE $10.72 1.13%
AAPL $112.60 4.50%
FB $90.10 3.30%
GOOG $617.29 3.30%

Markets

Chart of I:DJI
DOW 16,351.38 +293.03 1.82%
S&P 500 1,948.86 +35.01 1.83%
NASDAQ 4,749.9790 +113.8740 2.46%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs