ETF Talk: These Chinese Red Chips are Really Blue

China’s astonishing growth in Gross Domestic Product (GDP) during the past several years has been driven in no small part by infrastructure investment, economic liberalization and rising living standards. As China has de-regulated its banking and investment sectors, opportunities continue to abound for Chinese and foreign investors alike. One way to dip your toe into this market is via the iShares China Large-Cap ETF (FXI).

This fund attempts to match the price and yield performance, before fees and expenses, of an investment fund focused on the largest and most liquid 25 Chinese companies traded on the Hong Kong Stock Exchange. These companies operate in mainland China and include red chips (Chinese companies incorporated outside China), p chips (Chinese companies incorporated in the Cayman Islands, Bermuda and the British Virgin Islands) and H Shares (companies incorporated inside mainland China).

FXI is down 5.63% for the year, following a drop in July. This dip presents an opportunity for investors to make a market-recovery play. After a similar slip in July 2012, the fund finished the year up by 16%. FXI’s dividend yield is 2.49%.

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