While China’s economy continues to face some big picture headwinds, the country’s infrastructure spending remains a big player in the global economy. Regionally, in particular, its government’s One Belt One Road initiative looks to connect China overland to key areas including South and Southeast Asia, the Middle East, and Eastern Europe. That spending dovetails well with growing interest in emerging markets, speaking to the appeal of an EM equities ETF like OBOR.
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The KraneShares MSCI One Belt One Road Index ETF (OBOR) tracks the MSCI Global China Infrastructure Exposure Index. Charging 79 basis points (bps), it looks for emerging market firms set to profit from that infrastructure spending. It allocates 55% of its portfolio to non-Chinese firms and 45% of that weight to China firms. It also caps given countries at 10%, providing diversification within the EM equities space.
OBOR as an EM Equities ETF
The EM equities ETF, with this approach, provides well-crafted China exposure at somewhat of a remove. It offers exposure to the sheer size of the country’s economy but diversified with other EM companies. Currently, the strategy includes Singapore, Kuwait, and the Philippines as its largest weighted non-China nations by allocation.
It’s not just that indirect China exposure speaks to the case for OBOR. Emerging market equities have picked up some notable interest of late. Many global supply chains have moved toward emerging markets following the COVID-19 pandemic, while interest rate cycles have largely finished in those countries.
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OBOR can present an appealing source of both China and emerging market diversification. The EM equities ETF has returned 10.3% over the last six months on a fund NAV basis, per its manager KraneShares. For investors looking for a well-honed option for China exposure, OBOR could appeal.
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