Count stocks from China among this year’s international standouts. Widely observed gauges of equities in the world’s second-largest economy are outpacing both the S&P 500 and the MSCI Emerging Markets Index by comfortable margins since the start of this year.
The Invesco Golden Dragon China ETF (PGJ) is among the China ETFs beating the S&P 500 this year. PGJ, which follows the NASDAQ Golden Dragon China Index, is higher by about 11% over the past three months. And it could be primed for more upside. That’s because it’s home to some of the names driving China’s equity rebound.
PGJ is one of the oldest China ETFs (it turns 21 in December). It is a valid consideration for investors seeking access to China growth stocks and those looking to mitigate exposure to lumbering state-owned enterprises . That’s because the ETF allocates more than three-quarters of its roster to the consumer discretionary and communication services sectors.
Familiar Names Powering PGJ
Investors experienced with China stocks and ETFs like PGJ are bound to recognize many of the fund’s 75 holdings. For example, Alibaba (BABA), Yum China Holdings (YUMC) and JD.com (JD) combine for nearly 22% of PGJ’s portfolio.
In terms of the best China stocks to buy, “best” is in the eye of the beholder. But Morningstar highlights some useful barometers, including attractive valuations, listings on major U.S. exchanges, and wide moats. Many PGJ holdings check some or all of those boxes, with JD.com being an example.
“We think management will place more emphasis on growing revenue per user, expansion into lower-tier cities. Therefore, JD would not invest in new areas as aggressively as [before. So] we think JD will be able to maintain a positive non-GAAP net margin. Its financial strength should improve in the future,” according to the research firm.
