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Is it the Right Time to Buy China ETFs? Let's Explore

Sweta Jaiswal, FRM

The world’s second-largest economy is gradually recovering from the coronavirus outbreak. It has also ended the lockdown of Wuhan, which was the epicenter of the outbreak. The country has also been reporting new indigenous infections and deaths in very nominal numbers.

China’s official Purchasing Manager’s Index (PMI) for March has managed to surpass expectations in spite of its economy being hit by the pandemic. The PMI for March came in at 52, beating analysts’ expectations of 45 (per a Reuters’ poll). The metric compares favorably with the record low level of 35.7 seen in February. Notably, PMI readings above 50 indicate expansion. China’s official non-manufacturing PMI came in at 52.3 in March, comparing favorably with 29.6 in February. Moreover, China’s Ministry of Industry and Information Technology has informed that the resumption of work rate for larger industrial enterprises was 98.6%, and the return of workers stood at 89.9% (as of Mar 28) (read: These China ETFs Hardly Felt Any Coronavirus Pain in Q1).

China is still exposed to risks of a second wave of new coronavirus infections and drop in global economic growth. The country increased border control initiatives on Apr 6 as the number of imported coronavirus cases surged to 951, while the asymptomatic cases also increased sharply. Moreover, the pandemic outside mainland China is a concern as slowing global economic growth might result in waning demand. Also, analysts estimate a contraction in China’s economy in the first quarter of 2020. Deutsche Bank sees the global economy falling into a coronavirus-led recession in the first half of 2020. China’s economy is projected to shrink 31.7% in the ongoing quarter before rebounding sharply in the next.

Meanwhile, China’s central bank has been taking adequate measures. It injected $14.3 billion into the financial system, with the offer of one-year medium-term lending facility loans. The People’s Bank of China  also trimmed the amount of cash a bank must hold in reserve. The move is expected to inject about 550 billion yuan of liquidity into the financial system (read: China ETFs to Gain on New Stimuli to Combat Coronavirus).

ETFs in Focus

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

MCHI

This fund tracks the MSCI China Index. It comprises 603 holdings. The fund’s AUM is $5.22 billion and expense ratio is 0.59% (read: Should You Buy China ETFs as Coronavirus Cases Wane?).

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 $4.19 billion and expense ratio is 0.74% (read: Will China ETFs Gain on New Round of Monetary Easing?).

ASHR

This fund tracks the CSI 300 Index. It comprises 302 holdings. The fund’s AUM is $1.76 billion and expense ratio is 0.65%.

GXC

The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P China BMI Index. It comprises 733 holdings. The fund’s AUM is $1.22 billion and expense ratio is 0.59%.

CNYA

The fund tracks the MSCI China A Inclusion Index. It comprises 467 holdings. The fund’s AUM is $323.4 million and expense ratio is 0.60% (read: What Coronavirus? These China ETFs Gained Past Month).

PGJ

This fund follows the NASDAQ Golden Dragon China Index, which offers exposure to the U.S. exchange-listed companies headquartered or incorporated in the People’s Republic of China. It holds a basket of 65 stocks. The product has an AUM of $154.6 million and charges 70 bps in annual fees.

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