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Mutual Fund Commentary

China has cemented its position as the world’s fastest growing major economy by growing 12% in this year’s first quarter. Emerging virtually unscathed from the recent global economic crisis, its economy has been boosted by higher government spending and high liquidity levels from its banking system. A strong market at home and large inflows of foreign capital make it one of the most alluring investment destinations. Mutual funds focusing on China can significantly reduce the risks involved while harnessing its economic strength.

Below we will share with you 5 top rated China funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all China funds, then click here.

Guinness Atkinson China & Hong Kong (ICHKX - MF report) seeks capital appreciation. It invests in companies traded on the Hong Kong and Chinese exchanges. It also purchases securities of companies who derive at least half of their revenues from operations in China. The fund has a five year annualized return of 14.68%.

The fund manager is Timothy W.N. Guinness and he has managed this China fund since 2003.

Dreyfus Greater China A (DPCAX) primarily invests in companies listed on exchanges in Greater China, which includes Hong Kong and Taiwan. It also purchases stocks in firms which derive half their revenues from this region. It may also invest in derivatives, futures, options and forward contracts. The fund has a ten year annualized return of 10.74%.

As of February 2010, this China fund held 64 issues, with 4.67% of its total assets invested in AviChina Industry & Technology Co. Ltd.

ProFunds UltraChina (UGPIX - MF report) seeks to match the daily performance of the Bank of New York Mellon China Select ADR Index. It invests the majority of its assets in securities which are similar to those included in this Index. The fund may use leveraged and sampling techniques to fulfill its stated investment objective. It is a no-load fund.

The fund returned 177.09% in the last one year period.

AIM China A (AACFX) invests heavily in equity and related securities, such as convertible bonds issued by companies with significant Chinese operations. Not more than 25% of its net assets may be used to purchase investment grade debt securities. The fund returned 89.3% over the last one year period and has a three year annualized return of 12.11%.

The China fund has a minimum initial investment of $1000 and an expense ratio of 1.89% compared to a category average of 1.98%.

Direxion Monthly China Bull 2X (DXHLX) seeks monthly results which are 200% of that of the FTSE/Xinhua China 25 Index. At least 80% of its assets are used to purchase equity securities that make up the index as well other financial instruments. The fund returned 133.52% over the last one year period.

The fund manager is Adam Gould and he has managed this China fund since 2007.

To view the Zacks Rank and past performance of all China funds, then click here.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds/mutualfund/