Checking In: Success Where Others Failed? (EWHS, EWH, FXI)

There has been some talk about ETF closures lately, but if no more ETFs were closed and no more were brought to market for the rest of 2012, by itself iShares would have introduced more new ETFs than have closed. Plenty of those new iShares ETFs could prove to be rivals to previously existing products, but a couple of them are copies of ETFs that closed. You might remember that there was a Hong Kong small-cap ETF that saw its end late last year. Well, that didn't stop iShares from rolling out the iShares MSCI Hong Kong Small Cap Index Fund EWHS in January. ETFs usually meet their end because of low assets and/or weak trading volume and those were the culprits behind the death of the old Hong Kong small-cap play, but EWHS is off to a fine start in terms of AUM. Six weeks into its life, the ETF has over $5.8 million in assets. For now, volume leaves something to be desired at less than 820 shares per day. Home to 48 stocks, EWHS has an expense ratio of 0.59%. EWHS is obviously the small-cap equivalent to the iShares MSCI Hong Kong Index Fund EWH and beyond tracking the same country, both ETFs share something else in common: Excessive weights to one sector. In the case of EWH, it's a 61% weight to financials. Regarding EWHS, it's a 41% allocation to consumer discretionary names. Overall, EWHS offers exposure to nine sectors, but three – consumer discretionary, financials and industrials – represent about 71% of the ETF's weight. Maybe timing has something to do with the success of new ETFs. Last year wasn't the best of times to be involved with Hong Kong and the old Hong Kong small-cap ETF perished. Things are much better this year and EWHS at least has a decent AUM haul and there are ample reasons to consider investing in Hong Kong. The country has excellent credit and is a developed market avenue into China. If those factors don't boost the vitals for EWHS, maybe this will: Since inception, EWHS has outperformed its large-cap cousin and the iShares FTSE China 25 Index Fund FXI. That's some impressive validation right there. Another feather in EWHS' cap: It has more than doubled the returns of the iShares MSCI Singapore Small Cap Index Fund EWSS, which debuted on the same day. Bottom line: EWHS is another option for those seeking Hong Kong exposure and to this point, the returns have validated the fund's existence. The issue will be can EWHS garner enough AUM and volume to make it more successful than its predecessor.