The BMO China Equity Index ETF (TSX:ZCH) could be a great way for North American investors to diversify their portfolios, especially with the U.S. and China continuing to be at odds over trade.
Investing in some strong Chinese stocks could give investors a way to hedge against a struggling economy. While there’s no guarantee that China wouldn’t also run into problems, especially during a prolonged trade war, the ETF would give investors exposure in another key part of the world.
For what it’s worth, the ETF hasn’t done badly this year, even though there have been concerns between relations involving not only the U.S. and China, but Canada and China as well.
Year to date, the stock has still be able to rise about 10%. If we extend that to a full 12 months, then it becomes a decline of around 3.5%, which isn’t terribly bad given how tense things have been.
In five years, the ETF has climbed 29% in value. The fund has also averaged a 12-month yield of 1.25% and can produce some income along the way to offset any losses that may be incurred.
The ETF has a broad portfolio with more than one-third of the holdings coming from consumer cyclical stocks, 20% from the technology sector, and 15% in communication service. Energy is the only other sector above 10%, making up around 11.5% of the total holdings.
The largest holdings in the ETF are some of the most well-known stocks based in China: Alibaba Group Holding Limited (NYSE:BABA) at 21.7%, China Mobile Limited (NYSE:CHL) at 11.7%, and Baidu, Inc (NASDAQ:BIDU) at 7.5%.
