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New ETF (JCHI) Hits Market to Tap China's Growth Prospects

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JP Morgan, recently launched an exchange traded fund (ETF) called JPMorgan Active China ETF (JCHI - Free Report) on March 16. The launch seems perfectly-timed with China reopening its economy and lifting its border restrictions.

With China lifting its zero-Covid restrictions, the growth prospects of its economy are positive making it an attractive investing destination. Due to the increased risk appetite of investors, China stocks could surge, as quoted on CNBC.

No wonder, the new ETF has a high chance of amassing considerable assets in the near term. Let’s delve a little deeper.

Inside JCHI                                                                         

JCHI is an actively managed fund, which seeks to provide capital appreciation in the long term by investing primarily in equity securities economically tied to China.

Holding 40 to 70 securities in its basket under normal circumstances, the portfolio looks to invest majorly in Communication Services (13.8%), Consumer Discretionary (18.3%) and Consumer Staples (11.6%). The fund charges an annual fee of 0.65%.

Tencent (TCEHY - Free Report) , China Merchants Bank (CIHKY - Free Report) and Alibaba (BABA - Free Report) are the top three holding of JCHI. Currently the fund has amassed $9.66 million in its asset base.

How Does It Fit in a Portfolio?

The Chinese stock market has gained momentum lately on signs of economic recovery and hopes of more support from the government. The reopening of the economy post COVID-19 restrictions has brought a rebound in consumer spending, industrial output and investment this year.

According to an IMF report, the Chinese economy is expected to grow by 5.2% this year, contributing to a third of the global growth. However, rising unemployment and the real estate slump will continue to weigh on the growth prospects, along with the shrinking population in China and declined productivity growth levels.

The rising political tensions between the United States and China and between China and Taiwan could be hindrances to that country’s projected growth. However, China’s potential for economic growth and consumer-driven demand could trump the persisting tensions.

Added to the positive sentiment is the strong credit growth. Money supply in China expanded at the fastest pace in nearly seven years, as Beijing looked to support a promising economic recovery amid rising global risks. (Read: 5 China ETFs to Tap as Economy Recovers )

Also, the People's Bank of China (PBOC) recently said that it would slash the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points (bps), effective March 27. The move should bolster China equity investing.

Any Competition?

The space is teeming with products. The largest fund in the space is iShares MSCI China ETF (MCHI - Free Report) with about $8.19 billion. This follows funds like iShares China Large-Cap ETF (FXI - Free Report) with about $5.35 billion and SPDR S&P China ETF (GXC - Free Report) with about $1.19 billion in assets. Notably, MCHI, FXI and GXC charge 58 bps, 74 bps and 59 bps in fees, respectively.

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