GXC Stock – Broad Exposure and Big Potential
Explore an ETF Backed by China’s Top Large-Cap Companies
It really takes a while for new investors and traders to realize that markets move in the opposite direction of what most people expect them to. Buffett epitomizes this wisdom best when he advises investors to conduct their affairs in a way that is opposite to most other investors.
Multiple wisdoms like the one above could remain hidden from most people, and we are here to uncover one more wisdom for you. To beat the market by a significant margin, an investor needs to employ considerable leverage, which we do not advise, or invest in an asset class that is broadly hated or avoided.
We think we have an asset class like that—large-cap Chinese/Hong Kong companies. Multiple ETFs and Indexes follow this asset class.
In the US, the best-known ETF is the FXI ETF. In Europe, that would be the ICHN ETF. Our article will explore the GXC stock —SPDR S&P China ETF.
The GXC Stock: A Closer Look
All the ETFs we mentioned have slightly different compositions, but they invariably contain some of the largest Chinese stocks: Tencent Holding Limited (TCEHY), Alibaba Holding Group Limited (BABA), PDD Holding Inc (PDD), JD.com Inc (JD), Meituan (3690 HK), and Xiaomi Corp (1810 HK).
The stock we will explore, the GXC ETF, is not the largest one by far. However, it is the one for which we have the most data, courtesy of State Street Global Advisors. Hence, we will focus on it.
Given that its composition is close to that of FXI and ICHN, we would assume that our findings will translate into most other China ETFs that have large weights in the stocks we mentioned above.
GXC ETF vs. SPY ETF: Side-by-Side Comparison
| Name | 2025 PE | 3-5 Yr Earnings Growth | 2026 PE Ratio | 2027 PE Ratio | 2028 PE Ratio |
| SPY | 24,47 | 14,40% | 21,39 | 18,70 | 16,34 |
| GXC | 10,2 | 10,23% | 9,25 | 8,39 | 7,62 |
Yes, Chinese stocks are trading at a 50% discount on a PE ratio basis versus US stocks. However, their potential for appreciation is even higher:
| Name | Price/Book Ratio |
| SPY | 4,93 |
| GXC | 1,26 |
Chinese stocks are trading close to their book value, with analysts projecting an annual growth rate of approximately 10% over the next 3–5 years. This attractive valuation is further supported by their higher-than-average dividend yields.
| Name | Div Yield |
| SPY | 1,25% |
| GXC | 2,48% |
Why Now Is the Time to Consider Chinese Stock
Let’s start with the numbers. Since 2016, SPY ETF, without dividends, has been up 168%, while FXI, without dividends, has been down about 12%. The main period in which FXI began to underperform was the beginning of 2019 when Mr. Trump started toughening his China policy, including tariffs.
However, that underperformance continued even under President Biden, whose administration, while not friendly to China, was at least not so belligerent. The truth is that the reason for the Chinese stock’s “lost decade” is not necessarily only US trade policies. The underperformance is due to low consumer confidence in China following the Covid-19 epidemic.
While Mr. Trump is credited with the underperformance of the Chinese stock markets due to his tough stance on China, we would argue that the Chinese government’s zero-tolerance policy towards COVID-19 and the bursting of the China Real Estate Bubble in 2022 and 2023 might also have been responsible.
Anyway, while investors continue to treat the Chinese stock markets as second-rate, the top Chinese companies by market capitalization are quite high-quality companies. We are sure that transparency, shareholder rights, and equal treatment of foreign investors will be issues for investors in China for a long time.
However, the top companies in China are in a class of their own.
Key Takeaway: Is GXC Stock a Buy?
In our view, GXC stock offers a compelling opportunity for long-term investors looking to gain exposure to undervalued yet high-quality Chinese large-cap companies. Moreover, the ETF’s attractive valuation metrics—including low PE ratios, strong dividend yields, and price-to-book ratios near historic lows—make it an appealing choice for contrarian investors willing to look beyond the mainstream.
Of course, geopolitical uncertainties, such as potential policies under a future Trump administration or ongoing US-China tensions, may create short-term volatility. However, these challenges are offset by the long-term growth potential of China’s leading companies. For instance, giants like Tencent, Alibaba, and JD.com continue to excel in key sectors like technology, e-commerce, and on-demand services, demonstrating both resilience and relevance in an ever-evolving market.