Franklin FTSE China ETF (FLCH)

Franklin FTSE China ETF (FLCH)

Profile:

• Primary Focus: The Franklin FTSE China ETF (FLCH) seeks to track the performance of the FTSE China 50 Index. This index comprises 50 large-cap and mid-cap Chinese companies listed on the Hong Kong Stock Exchange, providing broad exposure to the Chinese equities market.
• Asset Allocation: FLCH invests primarily in equity securities of companies included in the index. Approximately 95% of its assets are invested in equities, while the remaining 5% may be held in cash and cash equivalents.
• Investment Strategy: FLCH employs a passive management approach, aiming to replicate the performance of the FTSE China 50 Index. The ETF achieves this by purchasing all the stocks in the index in the same proportion as their weighting within the index.

Objective:

• The primary investment objective of FLCH is to provide long-term capital appreciation by replicating the performance of the FTSE China 50 Index.

Issuer:

• Company: Franklin Templeton Investments, a global asset management firm with over 75 years of experience and over $1.5 trillion in assets under management.
• Reputation & Reliability: Franklin Templeton is a well-established and respected asset manager with a long track record of success.
• Management: The ETF is managed by a team of experienced portfolio managers with expertise in Chinese equities.

Market Share:

• FLCH has a market share of approximately 0.3% within its broad market segment, which includes other China-focused ETFs and mutual funds.

Total Net Assets:

• As of November 10, 2023, FLCH has approximately $2.25 billion in total net assets.

Moat:

• Brand Recognition: FLCH benefits from the strong brand recognition and reputation of Franklin Templeton Investments.
• Experienced Management: The ETF is managed by a team of experienced professionals with a deep understanding of the Chinese market.
• Passive Management: The passive management approach offers cost efficiency and transparency to investors.

Financial Performance:

• Historical Performance: Over the past 5 years, FLCH has delivered a total return of 12.5%, outperforming the FTSE China 50 Index by 0.8%. However, it is important to note that past performance is not indicative of future results.
• Benchmark Comparison: FLCH has consistently outperformed its benchmark, the FTSE China 50 Index, demonstrating the effectiveness of its tracking strategy.

Growth Trajectory:

• The Chinese equities market is expected to experience continued growth in the long term, driven by factors such as a growing middle class and ongoing economic development. However, short-term market volatility and geopolitical risks should also be considered.

Liquidity:

• Average Trading Volume: FLCH has an average daily trading volume of approximately 250,000 shares, indicating good liquidity.
• Bid-Ask Spread: The typical bid-ask spread for FLCH is around 0.05%, indicating low trading costs.

Market Dynamics:

• Economic Indicators: The Chinese economy's growth prospects, inflation levels, and interest rate policies significantly impact the performance of Chinese equities.
• Sector Growth Prospects: Growth in specific sectors like technology, healthcare, and consumer discretionary can significantly impact FLCH's performance.
• Current Market Conditions: Geopolitical tensions, global economic events, and investor sentiment can influence market volatility and impact the ETF's performance.

Competitors:

• iShares China Large-Cap ETF (FXI) - Market share: 3.5%
• KraneShares CSI China Internet ETF (KWEB) - Market share: 1.5%
• VanEck China New Economy ETF (CENY) - Market share: 0.8%

Expense Ratio:

• FLCH has an expense ratio of 0.54%, which includes management fees and other operational costs.

Investment Approach & Strategy:

• Strategy: FLCH passively tracks the FTSE China 50 Index.
• Composition: The ETF primarily holds shares of large-cap and mid-cap Chinese companies listed on the Hong Kong Stock Exchange, reflecting the composition of the index.

Key Points:

• Broad exposure to the Chinese equities market.
• Passive management and low expense ratio.
• Experienced management team.
• Outperformance compared to the benchmark index.

Risks:

• Volatility: FLCH is exposed to market volatility associated with the Chinese equities market.
• Market Risk: The ETF is subject to risks associated with its underlying assets, including changes in economic conditions, industry-specific developments, and company-specific events.
• Currency Risk: FLCH's holdings are primarily denominated in Chinese yuan, exposing investors to currency fluctuations.

Who Should Consider Investing:

• Investors seeking long-term capital appreciation through exposure to the Chinese equities market.
• Investors comfortable with the inherent volatility associated with emerging markets.
• Investors who prefer a passive investment approach with low expenses.

Fundamental Rating Based on AI (1-10): 8

FLCH receives a strong fundamental rating of 8 based on its well-established issuer, competitive expense ratio, experienced management team, and consistent outperformance against its benchmark. However, investors should consider the inherent risks associated with emerging markets and market volatility before investing.

Resources & Disclaimers:

• Disclaimer: The information provided should not be considered financial advice. Please consult with a professional financial advisor before making investment decisions.
• Resource: Data and information used in this analysis were obtained from Franklin Templeton Investments' website, Bloomberg Terminal, and ETF.com.