Fund expert bets on China

Our two newest portfolio additions are the iShares FTSE China 25 Index (FXI) and the Global X China Consumer ETF (CHIQ).

FXI is an ETF that holds the top 25 stocks in the Shanghai Exchange,Meanwhile, CHIQ os a fund pegged to China-based companies that provide goods and services to Chinese citizens.

Recent economic data out of China has been encouraging, and we�ve seen a distinct improvement in that country�s industrial metrics, particularly with the Purchasing Managers Index, or PMI.

This measure of national manufacturing is crucial to growth in the country, and for the stocks in FXI and CHIQ.
More importantly, however, are the bevy of other fundamental positives in the country. Unlike the United States, which is grappling with a fiscal mess, China has very little debt, and remains flush with cash.

This fiscal health allows policymakers to react swiftly to challenges in the economy similar to the way they did in 2008, when massive stimulus helped the world get back on track.

Chinese policymakers also have free rein to adjust interest rates and bank reserve requirements as they see fit, and without any political opposition.

Yet by far, the biggest fundamental driver that�s set to fuel China, and the emerging markets tied to her fortunes, is the incredible rise of China�s middle class.

According to some estimates, China�s middle class � defined loosely as those with annual incomes of between $10,000 and $60,000 U.S. dollars � now tops 300 million people. That reality means that China�s middle class alone is larger than the entire population of the United States.

This growth of the middle class has tremendous ramifications for companies in China, and for companies doing business with China and with the emerging markets.

Simply put, the more than doubling of the current consumer class in China means a massive wealth effect for Chinese stocks, and for the emerging markets of Asia. This situation gives credence to an investable thesis that we plan to continue taking advantage of.



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