Fund Watch


SPDR Standard and Poor's China ETF

Nellie S. Huang

This exchange-traded fund is ideal for riding what remains one of the world’s fastest-growing economies.



As the world’s markets bob and weave, many investors are keeping a watchful eye on China and its decelerating economy. A hard landing could shake their newfound confidence; a well-managed slowdown could set their minds at ease.

SEE ALSO: Our Special Report on Exchange-Traded Funds

So why all the hand-wringing about China’s slowing growth? In the first quarter of 2012, the country’s economy expanded 8.1%. That’s slower than the 9.3% pace of 2011, but it tops the growth rate in all developed nations (and most emerging ones, too) over the same period. With the government aiming to improve the lot of hundreds of millions of people still living a third-world lifestyle, China has huge potential for growth.

Enter SPDR S&P China ETF (GXC). It tracks the S&P China BMI index, which follows Chinese stocks that are available to foreign investors. That means that all of the companies in the index, although based in China, actually trade on foreign exchanges.

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Rather than owning all 416 securities in the index, however, SPDR S&P China ETF owns just 170. State Street Global Advisors, sponsor of the SPDR ETFs, has found that the cost of copying some of the more exotic indexes precisely can “erode returns,” particularly in a fund’s early days, says State Street’s Kevin Quigg. So far, the SPDR ETF has done a good job of tracking its bogey. Over the past five years, it lagged the index by an average of 0.17 percentage point per year.


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