G-20 Summit Will Be Key Mover for Leveraged China ETFs
This article was originally published on ETFTrends.com.
A meeting with high-level officials doesn't get any higher when U.S. President Donald Trump and Chinese President Xi Jinping will be in the same room at the G-20 Summit scheduled to take place on November 30 in Buenos Aires. The byproduct of the meeting could cause a seismic shift in the markets on a global scale.
An October replete with sell-offs and a start to November that saw U.S. equities rally following the conclusion of the U.S. midterm elections was followed up by the return of trade wars racking the markets. Escalating trade tensions resumed when reports surfaced that President Donald Trump is threatening to install more tariffs, particularly on vehicles manufactured overseas.
Nonetheless, a CNBC report revealed that U.S. companies with manufacturing plants in China aren't ready to budge just because of the ongoing trade wars. The G-20 Summit, however, could change that.
"A lot of companies are talking about making changes, but (are) not actively making changes," said Chris Rogers, research analyst at Panjiva, a supply chain data company that's part of S&P Global Market Intelligence. "Nobody's going to make any changes until they see how this summit goes between President Trump and President Xi."
Leveraged ETFs to watch ahead of the G-20 Summit would include the Direxion Daily FTSE China Bull 3X ETF (YINN) , Direxion Daily FTSE China Bear 3X ETF (YANG) , Direxion Dly CSI 300 China A Share Br 1X ETF (CHAD) , Direxion Daily CSI 300 CHN A Share Bl 2X ETF (CHAU) , and Direxion Daily CSI CHN Internet Bull 2X Shares (CWEB) .
In terms of affecting the markets globally, ask any emerging markets investor whether the trade wars have affected their investments. The tariff-for-tariff battle has certainly wreaked havoc on emerging markets equities this year and more pain could come should a meeting between the two leaders of the world's largest economies produce a negative result.
In a recent New York Life Investments blog post on volatility, Sal Bruno and Mark Lacuesta aptly refer to trade wars as a "known unkown." The capital markets are certainly aware of the trade wars, but what they will bring in terms of ramifications is anybody's guess.
"The increase in volatility during October could be attributed to the impact of “known-unknowns” such as the evolving trade war with China, the speed of rising input costs, slowing capital expenditure spending, and Brexit negotiations becoming better understood," the post noted.
Even if nothing materializes at the G-20 meeting, in 2019 or at all, some companies have the economic wherewithal to sustain an extended trade war and others will simply stay to continue tapping into a Chinese consumer market that boasts a population of almost 1.4 billion people.
"We're not expecting to see a massive corporate exodus from China. These U.S. companies have been in the market for years and they're now aimed at gaining market share," said Nick Marro, a Hong Kong-based analyst with The Economist Intelligence Unit. "If we remember the core concerns over the trade war, they're really looking at market access concerns. The whole goal of this from the U.S. perspective is not to abandon the region."
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