"We're excited about the prospects for participation in the dynamic Hong Kong stock market through the iShares MSCI Hong Kong Index (ASE: EWH), our latest new buy," says Jim Trippon.
In his China Stock Digest, the advisor explains, "The ETF provides us with access to the Hong Kong Exchange's best equities, stocks which are usually inaccessible to foreign investors."
"This exchange-traded fund provides many of the benefits usually attributed to a mutual fund without the high expense ratio that some funds charge. As an ETF, the shares can be bought and sold as quickly and easily as any stock on the New York Stock Exchange.
"EWH uses a 'passive' or indexing investment approach, which attempts to approximate the investment performance of its benchmark index compiled by Morgan Stanley Capital International (MSCI).
"The EWH Fund does not match exactly the high-flying and well-known Hang Seng Index, which continues to set records, topping the 30,000 mark in October. In tracking the Morgan Stanley Capital International Index, EWH is based on a portfolio of large cap, value-oriented equities.
"The fund's biggest holding is a greater than 10% stake in the Hong Kong Stock Exchange itself. Not surprisingly, the EWH fund has the largest portion of its holdings in financial stocks, at 57.08%. Other top weightings are Consumer Discretionary at 12.76%, Industrials at 12.62% and Utilities at 8.89%,
"EWH has an expense ratio of 0.54%. It has a Price/Earnings ratio of 24.59 and a Price/Book of 6.45. With more than 40 holdings in total, the EWH fund has relatively low exposure to Chinese Mainland equities. N
"Nevertheless, EWH is likely benefiting from the flow of funds from mainland China seeking cheaper stocks as measured by valuation compared to the very high priced shares offered on the Shanghai and Shenzhen Exchanges.
"As long as prices for equities on the mainland remain in the stratosphere, we anticipate ongoing buying pressure for the shares represented by the EWH fund.
"One last note, purchases of shares directly on Chinese exchanges can only be managed practically through various funds. The upside of this restriction is the fact that investors are effectively holding their securities in foreign currency.
"The U.S. dollar continues to slide, and pressure is increasing for the Hong Kong dollar to loosen its peg to the greenback. If these trends continue, we may see a bonus from the EWH fund and some protection against the effects of the ailing U.S. dollar."
Each day, Steven Halpern's TheStockAdvisors.com website features the latest investment commentary and favorite stock picks of the nation's leading financial newsletter advisors.
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