Spread Betting Section

How To Generate Tax Free Profits On The Chinese Stockmarket

March 2005

Financial Spread Betting brokers now offer spread bets on the popular Exchange Trade Fund (ETF) on the Chinese stockmarket index called the FTSE/Xinhua 25.

ETFs are akin to funds that trade like shares. For example the FTSE/Xinhua 25 ETF buys all the shares within the index, loads them into one ‘company’ and then investors/traders can gain access to the stockmarket by simply buying the ETF.

ETFs are in many ways very similar to Tracker Funds which mimic the index but Tracker Funds are only offered by fund management firms like Fidelity and can’t be bought or sold on an official stock Exchange. So the fact that an ETF is always being quoted on an Exchange similar to a regular share like Vodafone makes them very attractive to investors. Ultimately ETFs are all about offering investors flexibility.

• Note that ETFs can also be shorted – Click here for an introduction to short selling
• The ticker symbol for the FTSE/Xinhua 25 on the London Stock Exchange is FXC

Sectors That Make Up The FTSE/Xinhua 25

SECTORS/INDUSTRIES
Resources	24.27%
Non-Cyclical Services	22.95%
Financials	17.05%
Cyclical Services	13.74%
General Industrials	6.68%
Utilities	6.27%
Basic Industries	5.47%
Cyclical Consumer Goods	3.57%

Is It Worth Investing In The Chinese Stockmarket

An interesting point about the Chinese economy is that if you listen to the news China is going to be massive but where is associated stockmarket performance? Money invested in the market 5 years ago has almost never shown a profit as you can see from the chart below.

This is why we like the idea of drip feeding a small amount of money into the Chinese market over the next few years. Yes, the market/economy is going to be massive but as ever the timing of exactly when to invest is the problem that most, if not all investors will struggle with.

If you want to know more about Tracker Funds and find out how to construct your own Tax-Free fund using spread bets please see this Newsletter article on the LearnMoney.co.uk site.

See Also

• List of Spread Bet Broker websites
• LearnMoney - How to set up a tax-free tracker fund using spread bets
• For more information on ETFs check out the iShares website