Time Your Entry Into China Energy Markets

Most portfolios today will normally have a sizeable allocation to Energy sector and one sees an approach which is moderate to aggressive

. Out weighting your assets this way is a very popular strategy specially when dabbling with the emerging economies like China and rest of the BRIC. Investor trust is easily formed as one understands Energy and Power Transmission companies are basically driving the growth for every other sector of the economy.

Investors sold to the asset and seeking a niche exposure may consider buying into the China Energy Sector through equity traded funds [ETF]. A savvy way to get exposed to almost all major power players of the Dragons Energy Suppliers who are busy meeting the demands of the countrys super paced manufacturing sector and the bloated power demands of the millions of middle class that are migrating from the native areas to bigger cities and urbanised areas.

With a consumption of more than 20% of the global produce, China is the biggest consumer among all nations and the power demands are unlikely to slow down at any point in near future.

In fact a recent Wall Street Journal report estimated that China may build about 1000 Giga Watts of additional capacity by 2025 to meet the indigenous demands.

A Pure play fund like Global X CHIE ETF correlates to the Solactive China Energy Index, which maintains a median for about 25 most liquid stocks from the mandarin markets. The bench mark is top heavy with the state run companies but covers all facets of the sector including the renewable power companies as well.

Chinese Oil and Gas companies make up for 65% of the index and Coal Operators account for a little above 10%. Equity wise the state giants like CNOOC Ltd. [9.67%], Petro-China [9.34%], Sinopec [9.83%] and China Shenhua Energy Company Ltd [9.21%] represent about 38% of the Solactive benchmark. Kunlun Energy and Huaneng Power cover another 5% each.

Global X CHIE ETF has given a Year to Date return of 8.61% as on 30th November 2012. NAV Figure is $ 14.38 as on 7th December 2012 and has seen a 52 week high of $15.33. For stock selection it follows the name sake index thus CNOOC, Petro-China, Sinopec and China Shenhua Energy are the top four equities in the funds basket.

An unconventional reason to commit money, but definitely rational!

We all know that the Asian Superpower is home to the most number of human beings, but what most westerners fail to identify is that a vast percentage of them are still living in villages or lesser urbanised areas and their energy demands are much lower than an average western person. A fact which is now rapidly getting altercated.

The demographic patterns are changing so much so that the State government itself anticipates an additional 500 million urban dwellers by 2030, a figure which is higher than the total population of most developed countries.

Now is a good time!

A mundane market activity of the past couple of years has only made Chinese power stocks and funds more attractive. The discounts available today compel a buy because long term logic for China growth still stands strong and most analysts including Steven Roach agree.

China Energy Funds and ETFs are unique and also a simple entry point. Tagged with the spot prices, ETFs erases the need for cumbersome company wise researches and present a stocky exposure. Although it is important to know that as compared to stocks a substantially higher expense ratio is there and the daily trading volumes are also lower. The lone product available for the category is Global X China Energy ETF (CHIE) which has about five and a half million dollars of assets under management and fund operators charge a management fee of 0.65%.

by: Adamina

POST COMMENT

Find New And Used Machinery For Sale In Australia China: The New Hub Of Outsourcing Reasons You Should Book A Luxury Hotel In Delhi For New Year Celebrations Highlights Of New Features Of Liferay Portal Edition 6.1 Garage Doors Las Vegas Exclusive Repair And New Construction Services Artificial Christmas Trees To Enter The New Era Of Christmas Celebration Celebrate This New Year At Shimla Kullu Manali Old And New Trend Of Classifieds A Whole New Introduction With Very New Nikon Coolpix L26 Energy Saving Pumps Computer Repair Nyhow To Find A Reputable Pc Repair Company In New York Latest Intel Ssd 335 Series With New Refreshing Features Iron Workers And Impact Fulfill Demand For Shop Ironworkers Through New Employment Website