7 Indicators Reveal Underlying Weakness for China ETFs
This article was originally published on ETFTrends.com.
Chinese markets and related-specific exchange traded funds have been hard hit by the tiff with the U.S., and many economic indicators reveal that the fallout from the trade war has rippled through China's economy.
Over the past year, the iShares China Large-Cap ETF (FXI) dropped 16.9% and Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) declined 30.3%.
China's stock market may continue to suffer as this downturn has been particularly detrimental to Chinese consumers. Consumer spending is slowing down due to the less-certain economic outlook, the trade fight with the U.S., rising living costs and expectations of slower income growth, the Wall Street Journal reports. Furthermore, slowing sales, rising costs and trade-related uncertainties are hitting businesses’ profit margins from retailers to manufacturers.
Specifically, retail sales growth dropped to its lowest level in over 15 years in November, falling to 8.1% year-over-year, compared to a 21.2% year-over-year at the start of 2008.
Property sales were only up 1.4% year-over-year at the end of November 2018. Beijing has yet to lift restrictions on home purchases as many are worried about a housing bubble.
Auto sales were down 13.9% year-over-year as of November 2018. Auto sales experienced their worst drop in almost seven years after the fifth consecutive monthly decline and set the world's largest auto market on pace for its first annual sales drop since 1990.
Consumption tax revenue plummeted 71.2% year-over-year, reflecting the weakness in consumer spending. The consumption tax is placed on luxury goods like high-end cosmetics and jewelry, along with more environmentally unfriendly items like cars and gasoline.
Industrial profits dipped 1.8%, its first decline in almost three years due to diminished demand in the wake of the slowdown and trade tensions with the U.S. In contrast, industrial profits showed double-digit growth back in 2017.
China's key Purchasing Managers Index slipped to 49.4 at the end of 2018, ending two years of expansions, and reflects rising concerns of an extended slowdown through this year.
Lastly, quarterly GDP figures revealed a 6.5% economic expansion in the third quarter of 2018, or its weakest pace in almost a decade, and many also anticipate growth to continue to slow ahead. Economists project growth to fall to 6.4% in the fourth quarter.
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