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Currency ETFs: Investors Look to Chinese Yuan

editor@etftrends.com (ETF Trends)

In the currency world, the dollar, euro and yen usually command the most attention, but investors should focus on the Chinese yuan and the WisdomTree Dreyfus Chinese Yuan Fund (CYB) , Market Vectors Chinese Renminbi ETN (CNY) and the CurrencyShares Chinese Renminbi Trust (FXCH) .

Earlier this week, the Chinese currency hit a five-year low, leaving some market observers to opine that the weak yuan could be a drag on U.S. stocks and perhaps their Chinese counterparts. Due to ongoing speculation regarding the country’s monetary policy, interest rates both there and in the U.S. and an overall cautionary view of the world’s second-largest economy, investors are scampering out of some well-known China ETFs.

Related: China Economic Woes Drag on Miner ETFs

“Evercore ISI technical analyst Rich Ross believes the yuan’s devaluation could also bring U.S. stocks down based on previous events within the past year,” reports CNBC. “Ross points to two key time frames that reveal the yuan’s more recent correlation with U.S. stocks. The first is a dip in August 2015, during which the yuan’s devaluation caused what Ross terms a “flash crash” that sent the S&P 500 down 10 percent. The second took place a few months later in November when the devalued yuan corresponded with a weak start into the new year for U.S. stocks.”

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China and Hong Kong ETFs, including the iShares China Large-Cap ETF (FXI) and the iShares MSCI Hong Kong ETF (EWH) , have been stung by outflows this year and are lagging broader emerging markets benchmarks as investors such for clarity on Chinese monetary policy.

Over 260 U.S.-listed ETFs feature some exposure to China with marquee names including the iShares China Large-Cap ETF, which is the largest China-related ETF that tracks Chinese companies listed on the Hong Kong stock exchange. H-shares, or the Chinese stocks trading in Hong Kong are some of the least expensive stocks in the world and FXI has a price-to-earnings ratio below that of the MSCI Emerging Markets Index.

Related: 15 Cheap Emerging Market ETFs

CYB provides an actively managed approach to gain exposure to the Chinese yuan. It achieves its objective by investing in short-term, investment-grade instruments.

CNY, an exchange traded note, follows price movements between the yuan and USD. This note is open to credit risk and uses rolling, three-month currency futures contracts to provide exposure to the exchange rate of the Chinese yuan to the U.S. dollar.

FXCH maintains a deposit account denominated in Chinese renminbi, and interest earned will be used to pay expenses and any left over will be distributed to shareholders.

For more news on China ETFs, visit our China category .

WisdomTree Dreyfus Chinese Yuan Fund


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.