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ETFs in Focus as Trade Tussle Dampens Chinese Exports

Sweta Jaiswal, FRM

China’s export data for November 2019 lagged analysts’ expectations. The numbers were released at a time when the two largest economies are negotiating a partial trade pact.

Chinese exports slid 1.1% year over year in November against analysts’ estimate of a 0.8% rise, per a Bloomberg poll. The export levels in November were weaker than the 0.9% drop in October. In fact, the export levels declined for the fourth consecutive month. Waning demand due to slowing global economic growth and persistent trade war posing headwinds to the Chinese manufacturers might have induced this deterioration in export levels (read: China's Factory Activity Data Disappoints Again: ETFs in Focus).

Meanwhile, China’s import levels in November inched up 0.3% year over year after declining at a stretch for the previous six months. The metric thus stands in contrast to the analysts’ forecast of a 1.8% dip.  China’s domestic demand seems to be rebounding on measures taken by the Chinese government (read: ETFs in Focus as China Cuts Key Repo Rate).

However, China reported a trade surplus of $38.73 billion in November compared with analysts’ projection of $44.3 billion. The metric also compares unfavorably with October’s reported figure of $42.91 billion.

What’s Ailing the Chinese Exports?

Trade tensions between the United States and China have been affecting China’s economy. Notably, China’s exports to the United States  fell 12.5% year over year in dollar terms in January-November 2019 period. Moreover, Chinese imports from the United States contracted 23.3% year over year. Also, China’s trade surplus with the United States came in at $24.61 billion in November compared with $26.42 billion in October (read: Time to Buy Global Low-Volatility ETFs?).

Per analysts, the Chinese economy did not seem to be gaining from the holiday season, especially in the consumer electronics goods category. Trade spat also prompted manufactures to move out of China, front-load stock before tariff hikes and also shift to other suppliers.

ETFs in Focus

Against this backdrop, investors can keep a tab on a few China ETFs like iShares China Large-Cap ETF FXI, iShares MSCI China ETF MCHI, Xtrackers Harvest CSI 300 China A-Shares ETF ASHR and Invesco Golden Dragon China ETF PGJ.

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 $4.41 billion and the expense ratio, 0.74% (read: Top ETF Stories of November).

MCHI

This fund tracks the MSCI China Index. It comprises 603 holdings. The fund’s AUM is $4.18 billion and the expense ratio, 0.59%.

ASHR

This fund tracks the CSI 300 Index. It comprises 309 holdings. The fund has an AUM of $1.64 billion and an expense ratio of 0.65% (read: Should You Buy China ETFs Now?).

PGJ

This fund follows the NASDAQ Golden Dragon China Index, offering exposure to the U.S. exchange-listed companies, which are headquartered or incorporated in the People’s Republic of China. It holds a basket of 66 stocks. The product’s AUM is $188.5 million and charges 70 bps in annual fees (read: Dump Slowdown Fear, Bet on These China ETFs).

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Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR): ETF Research Reports
 
Invesco Golden Dragon China ETF (PGJ): ETF Research Reports
 
iShares China Large-Cap ETF (FXI): ETF Research Reports
 
iShares MSCI China ETF (MCHI): ETF Research Reports
 
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