5 ETFs to Avoid as China Stocks Tumble to a 2-Year Low
After multiple rounds of negotiation this year, the United States and China have finally declared an all-out trade war that has shaken up the latter’s financial markets. On Jun 19, Shanghai stocks tumbled by nearly 4%, which is the worst in two years.
Chances of a full-blown trade war undermined investors’ confidence considerably, which triggered a panic selling in the Chinese markets. The Shanghai Composite relative strength index dropped to 27.5 on the same day to become the worst-performing benchmark globally this year with a 12% decline.
Trump’s Tariff Announcement
Donald Trump has announced tariff of 25% on a list of $50 billion-worth of Chinese goods, which will be implemented in two phases. In the first phase (from Jul 6) Chinese exports worth $34 billion covering 818 items, which include aerospace, electric cars, communications and technology, will be targeted. In the second phase (meeting scheduled on Jul 16), the fate of the remaining 280 will be decided.
China has retaliated by imposing 25% tariff on 659 U.S. goods worth $50 billion. The affected items include electric cars, fruits, cigar, lobsters, wine, vegetables and dairy products (read: How is the Current Trade Scenario Impacting Asia ETFs?).
Trump has announced additional tariff of $200 billion if Beijing continues to retaliate. This was done to reduce the massive trade deficit of $376 billion with China and make that country accountable for not following the intellectual property rights guidelines as per international standards. The larger goal of these sanctions, per analysts has been to disrupt the “Made in China 2025” plan through which the Chinese tech firms expect to dominate the high-tech global market (read: China ETFs to Watch Amid Signs of Weak Economic Growth).
As the situation has worsened, China ETFs have been affected. Below we have discussed the worst-performing China equity ETFs in the last three months as per ETF.com.
Xtrackers Harvest CSI 500 China-A Shares Small Cap ETF ASHS
The fund tracks the results of the China Securities 500 Index. It has 514 securities in its basket and has an asset base of $23.1 million. It charges a moderate annual fee of 65 basis points and has an average daily traded volume of 8400 shares. As for industry outlook, Industrials is the leading sector with 20.5% weight, while the next four (Information Technology, Materials, Consumer Discretionary and Health Care) make up 60% together. The fund has minimum concentration in terms of individual stocks as none holds more than 1%. The fund has lost 14.3% in the last three months.
VanEck Vectors ChinaAMC SME-ChiNext ETF CNXT
The fund tracks the performance of SME-ChiNext 100 Index. It has 101 stocks in its portfolio and has an average daily traded volume of 10,200 shares. The fund manages assets worth $25.1 million. Individually, none of the stocks holds more than 7%. As for industry outlook, Information Technology dominates the fund with 34% weight, while the next four (Industrials, Consumer Discretionary, Health Care and Materials) together make up about 50% of the allocations. The fund has a moderately high expense ratio of 0.78% and has lost 9.45% in the last three months.
SPDR MSCI China A Shares IMI ETF XINA
The fund analyses the total return performance of the MSCI China A International IMI Index. It has gathered assets of $2.2 million and trades an average daily volume of 2960 shares. The fund has 494 securities in its basket. Individually, none of the stocks holds more than 4%. In terms of industry, Financials is the leading sector with 20.2% weights, while the next four make around 50% of the portfolio. It has an expense ratio of 0.65%. The fund has lost 7% in the last three months (read: 5 Hottest Small-Cap ETFs of 2018).
VanEck Vectors ChinaAMC CSI 300 ETF PEK
The fund seeks investment results of the CSI 300 Index. It charges an annual fee of 72 basis points and has an asset base of $60.7 million. The fund has 306 fund holdings. Ping Insurance has the largest individual weight of 6.1% in the fund, with none of the remaining stocks crossing 4% allocation. Financials tops the chart in industry allocations holding 32% of the fund followed by Industrials and Consumer Discretionary, which together makes up around 25%. The fund has lost 5.8% in the last three months.
Xtrackers Harvest CSI 300 China A-Shares ETF ASHR
The fund tracks the performance of the CSI 300 Index. It has amassed an asset base of $690 million and trades an average daily volume of 1.07 million shares. The fund has 309 fund holdings. Ping Insurance has the largest individual weight of 6.2% in the fund with none of the remaining stocks crossing 4% allocation. Financials is the leading sector with 32% weight followed by Industrials and Consumer Discretionary which together make up around 25%. It has an expense ratio of 0.65% and a Zacks ETF Rank #3. The fund has lost 5.9% in the last three months.
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VANECK-CHINAMC (CNXT): ETF Research Reports
DEUTS-XT HV CS3 (ASHR): ETF Research Reports
DEUTS-XT HV CS5 (ASHS): ETF Research Reports
VANECK-CHINAAMC (PEK): ETF Research Reports
SPDR-MSCI CH A (XINA): ETF Research Reports
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