Top 3 China ETFs for 2017

Since China has the world’s second-largest economy, investing there is attractive for many reasons. China is growing rapidly, and as the exchange-traded funds (ETFs ) below indicate, there are some impressive returns to be made. Of course, there are some equally large risks to be handled as well. (See also: 4 Ways China Influences Global Economics.)

China ETFs may include companies listed in the United States as well as Hong Kong and Shanghai. In addition, two of these ETFs invest in derivatives, so investors should not consider these pure plays on Chinese stocks.

There is always risk in China of government intervention or manipulation, but using ETFs to invest there offers some protection. With a diversified set of stocks in an ETF, you are less likely to suffer from the behavior of one company. That said, the returns so far have been stellar.

The Chinese market is volatile, so investors need to be ready to ride out some ups and downs. This is especially true with leveraged ETFs. An ETF can fall as fast as it rises if the market turns sour. However, because ETFs can be traded like stocks, you can sell them fairly easily if you decide you want out.

We have selected three chinese ETFs that have offered returns of over 20% year to date. All figures are current as of May 26, 2017.

Direxion Daily FTSE China Bull 3X ETF (YINN)

YINN is a leveraged ETF. Because it seeks to beat the FTSE China 50 Index by 300%, it should be considered high risk. The underlying index is made up of the 50 biggest Chinese companies trading on the Hong Kong Stock Exchange.

The enormous returns year to date are an indication of how fast the Chinese economy is growing but also the fact that this ETF is leveraged.

Avg. Volume: 808,303

Net Assets: 145.92M

PE Ratio (TTM) N/A

Yield: 0.00%

YTD Return: 33.31%

Expense Ratio (net): 0.95%

Global X China Materials ETF (CHIM)

This Chinese ETF tracks the Solactive China Materials Total Return Index. It aims to keep at least 80% of its assets invested in securities from that index. It may invest in American Depositary Receipts (ADRs), as well as Global Depositary Receipts (GDRs). The focus is on the materials sector.

Avg. Volume: 3,731

Net Assets: 3.29M

PE Ratio (TTM) N/A

Yield: 0.99%

YTD Return: 20.41%

Expense Ratio (net): 0.65%

ProShares Ultra FTSE China 50 (XPP)

XPP uses the FTSE China 50 Index as its benchmark. It invests in securities from that index, but it also may invest in derivatives. In other words, this is a leveraged ETF. The fund tries to beat the underlying index by 200%. Of course, past performance does not guarantee future returns.

Avg. Volume: 12,736

Net Assets: 38.52M

PE Ratio (TTM) N/A

Yield: 0.00%

YTD Return: 22.56%

Expense Ratio (net): 0.95%

The Bottom Line

China is an exciting place, financially speaking. Its growth is rapid and investors are making money by investing there. However, there is still risk. The Chinese economy could stall, and the government meddles more in the markets than U.S. investors may be accustomed to.

Examine the China ETFs on the list to see if you want to put part of your portfolio in higher-risk investments. Know your risk tolerance and invest accordingly. Remember that leveraged ETFs can turn against you quickly if any of their derivatives turn out to be bad investments.

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