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China remains one of the world's fastest growing economies. It continues to intrigue and draw investors to it which began in earnest after 1979's Deng Xiaoping admonition "to grow rich is glorious." The high rate of economic growth has positive implications for investments opportunities. At the same time, high rates of growth create inflationary pressures which can quickly cause turmoil and losses for linked equity markets.

Many pundits believe China's growth has led to inflation currently and excess speculation in real estate markets has created a bubble they say. Over the past 18 months, Chinese authorities have acknowledged this concern by tightening bank reserve requirements to reduce speculative lending. Plus, many bearish pundits believe a break in the real estate bubble will bring China's economy down. However, as this is being written, Chinese monetary authorities are now easing lending restrictions and adding liquidity to reinvigorate lending to the economy.

There still remains a level of regulatory and corporate governance mistrust among some investors questioning the accuracy of accounting standards and enforcement. From a personal view, when I visited the recently opened stock exchange in Shanghai in 1992 our little group had a private session with the exchange Chairman. He was queried about this concern and responded by just saying: "We will adopt American rules." Well, that may not give us much confidence.

There aren't many established ETFs beyond our list of 10. Those that do exist are new and have yet to be seasoned. Without question there will be many more issues coming forth as time passes and issuers create new products especially linked to new sectors.

We rank the top 10 ETF by our proprietary stars system as outlined below. If an ETF you're interested in is not included but you'd like to know a ranking send an inquiry to

support@ETFDigest.com

and we'll attempt to satisfy your interest.

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Strong established linked index

Excellent consistent performance and index tracking

Low fee structure

Strong portfolio suitability

Excellent liquidity

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Established linked index even if "enhanced"

Good performance or more volatile if "enhanced" index

Average to higher fee structure

Good portfolio suitability or more active management if "enhanced" index

Decent liquidity

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Enhanced or seasoned index

Less consistent performance and more volatile

Fees higher than average

Portfolio suitability would need more active trading

Average to below average liquidity

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Index is new

Issue is new and needs seasoning

Fees are high

Portfolio suitability also needs seasoning

Liquidity below average

We feature a technical view of conditions from monthly chart views when possible. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach.

Premium members to the ETF Digest

receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.

#1:

iShares

China 25 Index ETF (FXI)

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FXI

follows the FTSE China 25 Index which measures the performance of the largest companies in the China equity market. The fund was launched in October 2004. The expense ratio is .72%. AUM equal nearly $6 billion and average daily trading volume is 24M shares. As of early January 2012 the annual dividend yield was 2.10% and YTD return 5.36 %.

Many investors don't believe this is the best ETF for overall Chinese investment exposure given its limited breadth and narrow number (25) constituents. Nevertheless it remains a popular a good trending market.

Direxion Shares and ProShares each have inverse and leveraged products available for those wishing to hedge or speculate.

Data as of First Quarter 2012

FXI Top Ten Holdings & Weightings

    China Mobile Ltd. (00941): 10.12%

    China Construction Bank Corp (00939): 8.83%

    Industrial And Commercial Bank Of China Ltd. (01398): 7.89%

    CNOOC, Ltd. (00883): 6.73%

    Bank Of China Ltd. (03988): 6.08%

    PetroChina Co Ltd (00857): 4.18%

    China United Network Communications Ltd. (00762): 4.13%

    China Merchants Bank Co., Ltd. (03968): 4.10%

    China Petroleum & Chemical Corporation (00386): 4.05%

    China Shenhua Energy Company Limited (01088): 4.02%

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    #2:

    iShares

    Hong Kong ETF (EWH)

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    EWH

    follows the MSCI Hong Kong Index which is a proprietary measure of the entire Hong Kong equity market. The fund was launched in March 1996 and is the granddaddy of all China-based funds. The expense ratio is .53%. AUM equal $1.8 billion and average daily trading volume is 6.1M shares. As of mid-January 2012 the annual dividend yield was 2.601% and YTD return 1.88%.

    It's popular to think of Hong Kong as not being China but it certainly is and became so in the 1007 handover from the British. It does have its own currency (for now) and is considered a special economic zone within China. Unlike other China sectors Hong Kong markets are dominated by property and the supply of property is very closely controlled by HK authorities which keeps prices high overall in a small land area.

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    #3:

    SPDR

    S&P China ETF (GXC)

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    GXC

    follows the S&P China BMI Index which is a market capitalization weighted index of companies traded in China available to foreign investors. The fund was launched in March 2007. The expense ratio is .59%. AUM equal $620 million and average daily trading volume is 135K shares. As of mid-January 2012 the annual dividend yield was 2.01% and YTRD return 5.33%.

    Some believe GXC has a more representative view of the contemporary China investing scene but that may or may not be the case. Viewing the holdings indicates similarities in structure with FXI for example.

    Data as of First Quarter 2012

    GXC Top Ten Holdings & Weightings

      China Mobile Ltd. (00941): 7.67%

      China Construction Bank Corp (00939): 7.49%

      Industrial And Commercial Bank Of China Ltd. (01398): 5.09%

      Baidu, Inc. ADR (BIDU): 4.77%

      CNOOC, Ltd. (00883): 4.20%

      PetroChina Co Ltd (00857): 4.03%

      Bank Of China Ltd. (03988): 3.52%

      Tencent Holdings Ltd. (00700): 2.99%

      China Life Insurance Company, Ltd. (02628): 2.81%

      China Petroleum & Chemical Corporation (00386): 2.73%

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      #4:

      PowerShares

      Golden Dragon ETF (PGJ)

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      PGJ

      follows the Halter USX China Index which is comprised of U.S.-listed securities of companies that derive a majority of their revenue from China. The fund was launched in December 2004. The expense ratio is .60%. AUM equal $241 million and average daily trading volume is 60K shares. As of mid-January 2012 the annual dividend yield was 2.29% and YTD return 5.81%.

      With holdings in PGJ you'll note a more equally weighted array of constituents.  This can be good or bad dependent on movements of ETFs with higher weights in some holdings. Nevertheless PGJ was one of the earlier issues in this space and has done reasonably well by comparison. 

      Data as of First Quarter 2012

      PGJ Top Ten Holdings & Weightings

        CNOOC, Ltd. ADR (CEO): 5.26%

        China Life Insurance Co Ltd ADR (LFC): 5.03%

        China Petroleum & Chemical Corporation ADR (SNP): 4.89%

        PetroChina Co Ltd ADR (PTR): 4.81%

        Yanzhou Coal Mining Company Limited ADR (YZC): 4.73%

        Baidu, Inc. ADR (BIDU): 4.61%

        China Unicom (Hong Kong) Ltd ADR (CHU): 4.52%

        Huaneng Power International Inc. ADR (HNP): 4.50%

        China Mobile Ltd. ADR (CHL): 4.46%

        China Telecom Corp Ltd ADR (CHA): 4.24%

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        #5:

        Guggenheim

        China Small-Cap ETF (HAO)

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        HAO

        follows the AlphaShares China Small Cap Index which is a proprietary measure of companies is China with a minimum market capitalization of $200 million to a maximum of $1.5 billion. The fund was launched in January 2008. The expense ratio is .70%. AUM equal $144 million and average daily trading volume is 125K shares. As of mid-January 2012 the annual dividend yield was 3.16% and YTD return 2.90%.

        Small caps have higher beta (volatility) and will outperform generally on the upside but underperform when conditions are more bearish.

        Data as of First Quarter 2012

        HAO Top Ten Holdings & Weightings

          Mindray Medical International Limited ADR (MR): 2.37%

          Tsingtao Brewery Co., Ltd. (TSGTF): 1.63%

          Guangdong Investment Ltd. (00270): 1.61%

          Zhaojin Mining Industry Co. Ltd. (01818): 1.57%

          Great Wall Motor Co., Ltd. (02333): 1.48%

          China BlueChemical Ltd. (03983): 1.46%

          Yingde Gases Group Co., Ltd. (2168): 1.44%

          China Shanshui Cement Group Limited (00691): 1.42%

          SOHO China Limited (00410): 1.30%

          China Everbright Ltd. (00165): 1.29%

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          #6:

          Guggenheim

          China All-Cap ETF (YAO)

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          YAO

          follows the AlphaShares China All-Cap Index which includes companies with market capitalizations greater than $500 million. The fund was launched in October 2009. The expense ratio is .70%. AUM equal $53 million and average daily trading volume is 22K shares. As of mid-January 2012 the annual dividend yield was 2.59% and YTD 5.53%.

          Weightings in the holdings are well balanced and perform similarly with others in the sector. The ETF has been around a shorter period of time than some of its peers. This accounts for lower AUM and trading volume.

          Data as of First Quarter 2012

          YAO Top Ten Holdings & Weightings

            Baidu, Inc. ADR (BIDU): 6.48%

            China Mobile Ltd. (00941): 5.96%

            Industrial And Commercial Bank Of China Ltd. (01398): 4.96%

            CNOOC, Ltd. (00883): 4.71%

            China Construction Bank Corp (00939): 4.70%

            PetroChina Co Ltd (00857): 4.66%

            Tencent Holdings Ltd. (00700): 3.42%

            Bank Of China Ltd. (03988): 3.36%

            China Life Insurance Co Ltd (02628): 3.31%

            China Petroleum & Chemical Corporation (00386): 3.06%

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            #7:

            iShares

            China ETF (FCHI)

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            FCHI

            follows the FTSE China Hong Kong Listed Index which includes mid-cap and large-cap companies listed in Hong Kong. The fund was launched in June of 2008. The expense ratio is .72%. AUM equal $38 million and average daily trading volume is 6K shares. As of mid-January 2012 the annual dividend was $.38 making the current yield 4.81% and YTD return 2.15%.

            The lower ranking is due to low trading volume and AUM making other choices perhaps more compelling. Holdings are similar to others above varying in weightings primarily--very heavy weights at top and then sliding precipitously. 

            Data as of First Quarter 2012

            FCHI Top Ten Holdings & Weightings

              China Mobile Ltd. (00941): 11.32%

              China Construction Bank Corp (00939): 9.77%

              Industrial And Commercial Bank Of China Ltd. (01398): 7.51%

              CNOOC, Ltd. (00883): 6.08%

              Bank Of China Ltd. (03988): 5.97%

              PetroChina Co Ltd (00857): 5.11%

              China Life Insurance Company, Ltd. (02628): 3.58%

              China Petroleum & Chemical Corporation (00386): 3.40%

              Ping An Insurance Group (PIAIF): 3.02%

              China United Network Communications Ltd. (00762): 2.95%

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              #8:

              iShares

              MSCI China ETF (MCHI)

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              MCHI

              follows the MSCI China Index which is the proprietary index measuring large-cap China equities. The fund was launched in March 2011. The expense ratio is .61%. AUM equal $112 million and average daily trading volume is 7.5K shares. As of mid-January 2012 the annual dividend yield was 2.40% and YTD return was 4.50%.

              As a new fund with little history it may surprise some to see AUM rise so quickly to over $112 million. This is the power of iShares marketing vs smaller providers. Nevertheless, the structure and weights are large-cap which gives investors a different exposure to an important market. In the end when viewing holdings you won't know too much difference here from FXI for example.

              Data as of First Quarter 2012

              MCHI Top Ten Holdings & Weightings

                China Mobile Ltd. (00941): 10.18%

                China Construction Bank Corp (00939): 7.22%

                Industrial And Commercial Bank Of China Ltd. (01398): 5.97%

                CNOOC, Ltd. (00883): 5.74%

                PetroChina Co Ltd (00857): 4.61%

                Bank Of China Ltd. (03988): 3.68%

                Tencent Holdings Ltd. (00700): 3.35%

                China Life Insurance Co Ltd (02628): 3.24%

                China Petroleum & Chemical Corporation (00386): 3.02%

                China Shenhua Energy Company Limited (01088): 2.53%

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                #9:

                Global X China

                Consumer ETF (CHIQ)

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                CHIQ

                follows the Solactive China Consumer Index which includes companies domiciled in China which have a consumer orientation. The fund was launched in November 2009. The expense ratio is .65%. AUM equal $117 million and average daily trading volume is 91K shares. As of mid-January 2012 the annual dividend yield was .4% and YTD return 4.67%.

                This fund seeks to take advantage of the fast growing consumer sector in China. With its large upwardly mobile population the obvious demand for better goods and services is only natural. Pockets of wealth are present in large cities whereas such is still not the case in rural and remote areas of the country.

                Data as of First Quarter 2012

                CHIQ Top Ten Holdings & Weightings

                  Hengan International Group Co., Ltd. (01044): 5.74%

                  Want Want China Holdings Limited (WWNTF): 5.65%

                  Tingyi (Cayman Islands) Holding Corp. (TCYMF): 5.57%

                  Dongfeng Motor Group Co Ltd (00489): 5.55%

                  China Resources Enterprise Ltd. (00291): 4.86%

                  New Oriental Education & Technology Group Inc. ADR (EDU): 4.19%

                  Guangzhou Automobile Group Co., Ltd. (02238): 3.97%

                  GOME Electrical Appliances Holding Ltd. (GMELF): 3.87%

                  Focus Media Holding, Ltd. ADR (FMCN): 3.80%

                  China Yurun Food Group Ltd. (01068): 3.80%

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                  #10:

                  Van Eck

                  China CSI 300 ETF (PEK)

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                  PEK

                  follows the important CSI 300 Index which consists of 300 A-Share stocks listed on the Shenzen or Shanghai Stock Exchange. The fund was launched in October 2010. The expense ratio is 72. AUM equal $15 million and average daily trading volume is less than 6K shares. As of mid-January 2012 the annual dividend yield is negligible and YTD return 1.3%.

                  This is an important and unique new issue; but, there is a problem for investors. The fund needs a license and permission from China regulators to buy share constituents of the index. So the fund has a derivative swap arrangement with Credit Suisse which provides exposure to the CSI 300 Index but at a price. Therefore, and until permission is granted, the fund trades at a substantial premium (currently over 5%) to the index. This is off-putting to investors but it's the only way foreign investors can gain exposure to this most important internal Chinese index. Van Eck is betting eventually permission will be granted and they will have the benefit of being first to the space. We look forward to permission being granted.

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                  Other ETFs stand-out as possible inclusions in the future including:

                  CHXX

                  (EG Shares China Infrastructure ETF);

                  CHIE

                  (Global X China Energy ETF);

                  CHIX

                  (Global X Financials ETF);

                  CHII

                  (Global X China Industrials ETF) and

                  CHIM

                  (Global X China Materials ETF).

                  ETF choices from China will continue to rapidly increase. Sometimes these offerings will need seasoning before investors can verify performance trends and validate investing in them. We've chosen to feature some that may be repetitive but clearly have something to offer as well. Some other Top 10 lists we've published may have similar ETFs within them and can become duplicative but we'll just have to live with this on occasion.

                  It's also important to remember that ETF sponsors have their own competitive business interests when issuing products which may not necessarily align with your investment needs. New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab's ETFs and Scottrade's Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned. 

                  For further information about portfolio structures using technical indicators like DeMark and other indicators, take a free 14-day trial at

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                  The ETF Digest has no current positions in the featured ETFs.

                  (Source for data is from ETF sponsors and various ETF data providers)

                  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.

                  Dave Fry is founder and publisher of

                  ETF Digest

                  , Dave's Daily blog and the best-selling book author of

                  Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management

                  , published by Wiley Finance in 2008. A detailed bio is here:

                  Dave Fry.