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China-US Trade War Rhetoric Softens: ETFs in Spotlight

Sweta Jaiswal, FRM

The latest round of statements coming from the United States and China provided some respite to investors. China’s Ministry of Commerce recently announced that the country is looking forward to another round of face-to-face trade negotiation meeting with the United States in September. It also added that China is planning not to immediately respond to Trump’s recent tariff hike. Meanwhile, Trump stated that trade discussions with China were also held (read: 4 Dividend ETFs to Ride Out Trade War Uncertainty).

Trade War So Far

China announced to impose new tariffs ranging between 5% and 10% on goods worth $75 billion from the United States on Aug 23. The tariffs will be levied beginning Sep 1 on specific items while the rest will be taxed from Dec 15 onward. Moreover, effective Dec 15, China has decided to reinstate a 25% tariff on U.S. automobiles or 5% on auto parts.

Trump has responded by raising tariffs on $550-billion worth of Chinese goods. He increased the existing tariffs to 30% from 25% on $250-billion of Chinese imports effective Oct 1. Moreover, further tariffs planned on $300-billion of Chinese goods will be revised to 15% from 10% in two stages — Sep 1 and Dec 15, respectively. Trump also ordered U.S. companies to look at alternative ways to manufacture their products in the United States and close operations in China (read: Trade War Gets Uglier: Here Are the ETF Winners & Losers).

What to Expect

Analysts’ are not expecting the United States and China to ink a deal before 2020. Some analysts believe that the speed at which ‘attacks and retaliations’ are taking place followed by the decision reversals in this trade brawl might escalate the ambiguity and uncertainty in the global markets.

Such periods of high unpredictability and instability keep investors on edge, making it difficult for business houses to plan a strong and concrete business strategy and capital expenditures. Moreover, there is no denying the fact that global economic growth is bearing the brunt of the ongoing trade tussle. Investors have been displeased with sluggish economic growth data coming from the U.K., Germany, Japan and China.

ETFs in Focus

We will like our investors to focus on other areas that are well poised to gain traction from this move.

iShares Asia 50 ETF AIA

The fund seeks to match the price and the yield of the S&P Asia 50 Index, before fees and expenses. The Index measures the performance of a few leading companies from Asian countries. The ETF holds 51 stocks in the basket. The fund’s AUM is $997.8 million and the expense ratio, 0.50% (read: Sino-US Trade Tension Softens: ETFs in Focus).

iShares MSCI All Country Asia ex-Japan ETF AAXJ

The fund tracks the MSCI AC Asia ex Japan Index. The ETF holds 883 stocks in the basket.The fund’s AUM is $3.56 billion and its expense ratio, 0.67% (read: Asian Shares Tumble on Recessionary Fears: ETFs in Focus).

iShares S&P 500 Growth ETF IVW

The iShares S&P 500 Growth ETF seeks investment results that meet the price and the yield performance of the S&P 500 Growth Index. This ETF has AUM of $23.44 billion. It holds 295 stocks in the basket.The fund charges an expense ratio of 0.18% (read: US-China Truce Talks Begin: ETFs to Shine).

iShares China Large-Cap ETF FXI

This fund seeks long-term growth by tracking the investment returns, before fees and expenses, of the FTSE China 50 Index. It comprises 50 holdings. The fund’s AUM is $4.14 billion and expense ratio is 0.74%. (read: Global Stimulus & Huawei Relief Boost Markets: ETFs in Focus ).

iShares PHLX Semiconductor ETF SOXX

This ETF offers exposure to 30 U.S. companies that design, manufacture and distribute semiconductors by tracking the PHLX SOX Semiconductor Sector Index. The fund has amassed $1.45 billion in its asset base and charges a fee of 46 bps a year (read: Chip ETFs in Focus as Trump Gets Requests for Huawei License).

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iShares PHLX Semiconductor ETF (SOXX): ETF Research Reports
 
iShares MSCI All Country Asia ex Japan ETF (AAXJ): ETF Research Reports
 
iShares S&P 500 Growth ETF (IVW): ETF Research Reports
 
iShares Asia 50 ETF (AIA): ETF Research Reports
 
iShares China Large-Cap ETF (FXI): ETF Research Reports
 
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