U.S. Markets open in 5 hrs 36 mins

Impressive Exports Data Put China ETFs in Focus

Sweta Jaiswal, FRM

China’s export and import data for October has cheered investors. Falling for the third consecutive month, the worst run since 2016, Chinese exports declined 0.9% year over year in October against analysts’ expectations of a fall of 3.9%, per a Reuters’ poll. The metric also compares favorably with September’s 3.2% slump. Per a Wall Street Journal’s report, China witnessed improved export levels to emerging markets and the European Union  (read: ETFs in Focus as China's GDP Nears 30-Year Low Level).

Meanwhile, China’s import levels in October declined for the sixth straight month by 6.4% year over year in comparison to analysts’ expectations of an 8.9% year-over-year decline. The metric also compares favorably with September’s 8.5% fall. Thus, China  reported  a trade surplus of $42.81 billion in October against analysts’ projections of a surplus of $40.83 billion.

What’s Causing the Slump?

Trade war tensions with the United States have been quite damaging for China’s economy. Notably, China’s exports to the United States fell 11.3% year over year to $347.8 billion in the January-October 2019 period. Moreover, Chinese imports from the United States contracted 25.4% year over year for the same period to $100 billion. Also, China’s trade surplus with the United States was $26.42 billion in October against $25.88 billion in September.

Weakening domestic market due to softening consumption, disappointing investment levels and unsatisfactory global commodity prices have been hurting China’s import levels. Moreover, the country witnessed a drop in imports of iron ore and copper. 

Is There Any Silver Lining?

China’s commerce ministry, represented by Gao Feng, recently expressed both countries' readiness to roll back the tariffs in phases. However, the Chinese government body did not specify any timeline. Moreover, it is being speculated that Beijing is contemplating the removal of restrictions on U.S. poultry imports. Also, the buzz is that United States might scrap the scheduled Dec 15 tariffs on around $156 billion worth of Chinese imports, covering cell phones, laptop computers and toys. However, analysts are of the opinion that any trade deal between the world’s largest economies might not be beneficial for Beijing on an immediate basis (read: Phase 1 Trade Deal or Not: ETFs to Ride the Trend).

Meanwhile, China’s central bank is taking measures to boost credit. Recently, the People’s Bank of China slashed the interest rate on its one-year medium-term lending facility loans for the first time since early 2016.

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 $4.60 billion and expense ratio is 0.74% (read: ETFs in Focus as US Imposes New Tariffs on Structural Steel).

MCHI

This fund tracks the MSCI China Index. It comprises 461 holdings. The fund’s AUM is $4.09 billion and expense ratio is 0.59% (read: China's Factory Activity Data Disappoints Again: ETFs in Focus).

ASHR

This fund tracks the CSI 300 Index. It comprises 301 holdings. The fund’s AUM is $1.77 billion and expense ratio is 0.65% (read: Should You Buy China ETFs Now?).

PGJ

This fund follows the NASDAQ Golden Dragon China Index, which offers exposure to the U.S. exchange-listed companies that are headquartered or incorporated in the People’s Republic of China. It holds a basket of 66 stocks. The product has AUM of $192 million and charges 70 bps in annual fees (read: Dump Slowdown Fear, Bet on These China ETFs).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR): ETF Research Reports
 
iShares MSCI China ETF (MCHI): ETF Research Reports
 
iShares China Large-Cap ETF (FXI): ETF Research Reports
 
Invesco Golden Dragon China ETF (PGJ): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report