For investors in the world's most important emerging market, the last few years haven't been so kind. Shares of Chinese firms have dwindled as slowing economic growth in the hot nation has prompted many investors to head for higher ground and abandon the developing country. Overall, the Chinese stock market is down around 40% from its highs reached in 2009.

However, recent data coming from the Dragon has been quite positive - spurring many analysts to believe that Asia's largest economy may finally be turning a corner. For investors, now could be the best time to add China to a portfolio and exchange traded funds (ETFs) could be the best way to do it.

Guide To Oil And Gas Plays In North America: We've got your comprehensive guide to oil and gas shales in North America.

The Dragon Roars Again
Despite its long-term promise, the short term hasn't been kind to investors in China. However, things may finally be looking up. New economic data coming from the emerging market has been quite positive and could signal a resurgence of the Chinese economy.

First, there are signs that the nation's troubled real estate sector may be coming back. China's ultra-hot property market needed to be cooled and measures taken by Beijing essentially completely "put the fire out" in the sector. Property values in certain key cities stalled and growth associated with housing shrank. According to official data by the National Bureau of Statistics of China, that cooling may have finally ended. The Bureau's latest report shows that the majority of China's top 70 cities showed modest increases in residential property sale prices in the summer. Those higher sale prices prove the local real estate market is on the mend. That's certainly bullish news for the economy as housing continues to be a major driver of growth. At the same time, data from the nation's industrial and manufacturing sectors are proving positive with the latest PMI reading, the first expansion in manufacturing in more than a year.

Secondly, the smart money has begun to return to Chinese shares and foreign direct investment continues to rise. Reuters reports that nearly $4 billion as gone into Chinese equity funds in the past two months. More importantly, the Chinese government has taken steps to streamline the approval process to encourage more direct foreign investment. That will help China benefit from the lower interest rates and stimulus programs implemented around the world as investors continue to look for returns.

Finally, stocks within the nation are cheap when compared to its emerging market and BRIC peers. The broad MSCI China index (ARCA:MCHI) currently can be had for a forward P/E of 9.2. That's less than Brazil at 9.9 and India at 13. China is also currently cheaper than the broad EM measure, the iShares MSCI Emerging Markets Index (ARCA:EEM).

Buying the Dragon
Given China's potential rebound and long-term promise, investors may want to give the nation a prime spot in their portfolio. The ETF boom has made it possible to add a swath of Chinese equities quite easily. The easiest way to do that is through the popular iShares FTSE China 25 Index Fund (ARCA:FXI). The fund is a $6.5 billion behemoth tracking 25 of China's largest firms. This includes exposure to oil producer CNOOC (NYSE:CEO) and China Mobile (NYSE:CHL). The fund trades almost 16 million shares a day and charges 0.72% in expenses. Investors looking broad exposure may also want to add the SPDR S&P China (ARCA:GXC). That ETF features a broader range of holdings.

Investors seeking broad exposure to China may also be interested in the new WisdomTree China Dividend ex-Financials (Nasdaq:CHXF). Many analysts believe that much of China's risk lies within its "shaky" banking system. The WisdomTree fund bets on a basket of Chinese stocks - that pay dividends - and eliminates the troubled financial sector from its holdings. The fund then offers better diversification that the FXI or GXC.

Finally, for investors who want more "oomph" from their China investments, both the Guggenheim China Real Estate (ARCA:TAO) and Global X China Consumer ETF (ARCA:CHIQ) could make great buys. The Guggenheim fund allows investors to bet on the nation's growing real estate sector, while the Global X ETF can be used to bet on its burgeoning consumer story.

The Bottom Line
While China has struggled in recent years, its long-term promise is still great. More importantly, recent economic data is pointing in the right direction. For investors, now could be the best time to add the emerging market giant to a portfolio and ETFs are a quite way to do just that. The previous ideas, along with the Market Vectors China ETF (ARCA:PEK) make ideal picks.

At the time of writing, Aaron Levitt did not own any shares in any company mentioned in this article.

Related Articles
  1. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  2. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  3. Chart Advisor

    How Are You Trading The Breakdown In Growth Stocks? (VOOG, IWF)

    Based on the charts of these two ETFs, bearish traders will start turning their attention to growth stocks.
  4. Mutual Funds & ETFs

    Pimco’s Top Funds for Retirement Income

    Once you're living off the money you've saved for retirement, is it invested in the right assets? Here are some from PIMCO that may be good options.
  5. Budgeting

    5 Alternatives to Traditional Health Insurance

    Discover five of the most popular alternatives to traditional health insurance plans, alternatives that are increasingly popular as health insurance costs rise.
  6. Chart Advisor

    Watch This ETF For Signs Of A Reversal (BCX)

    Trying to determine if the commodity markets are ready for a bounce? Take a look at the analysis of this ETF to find out if now is the time to buy.
  7. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  8. Mutual Funds & ETFs

    ETFs Can Be Safe Investments, If Used Correctly

    Learn about how ETFs can be a safe investment option if you know which funds to choose, including the basics of both indexed and leveraged ETFs.
  9. Mutual Funds & ETFs

    The Top 5 Large Cap Core ETFs for 2016 (VUG, SPLV)

    Look out for these five ETFs in 2016, and learn why investors should closely watch how the Federal Reserve moves heading into the new year.
  10. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
  3. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  4. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  5. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  6. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center