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Trump Postpones Tariff Deadline: 5 Hot China ETFs Set to Rally

Sweta Killa

The nearly one-year long trade spat between the United States and China seems to be coming to an end with the latest round of negotiations. This is especially true as President Donald Trump cited substantial progress in bilateral talks between the world’s two largest economies, including intellectual property protection and technology transfer issues. As such, he has suspended his plan for raising tariff from 10% to 25% on $200 billion worth of Chinese goods after Mar 1 deadline (read: U.S.-China Trade Optimism Boosts These ETFs).

Though the new deadline has not been announced, the news inspired optimism in Chinese stocks, which were hit hard by tariff war last year. The progress in trade talks has been instilling confidence since the start of the year. Additionally, stimulus in China’s economy has also raised the appeal for these stocks. China’s central bank cut its reserve requirement ratio (RRR) for the fifth time early this year and also offered financial institutions $83 billion in liquidity as part of a wider economic stimulus. The bank has signaled more stimulus measures in the near term.

Further, the lifting of some trading curbs as well as deepening reforms in the finance sector has added to the enthusiasm. Moreover, depressed valuations have enticed investors’ to charge up at lower level.

The combination of all these trends have injected around a trillion dollar rally into the Chinese stock market, sending several indices into the bull market territory. The ChiNext Index of small caps and technology stocks entered a bull market on Feb 22. The news of postponing tariff pushed other two major indices - Shanghai Composite index and CSI 300 Index – to the bull territory on Feb. 25. Notably, all the three indices increased more than 5.5% on Trump’s announcement (read: Will the Year of Pig Shower Fortunes on China ETFs?).

Given bullish fundamentals, China stocks are poised to go up further, especially in the wake of Trump’s announcement. As such, investors should definitely tap the opportune moment with the following five ETFs. These funds are hot right now and are expected to continue their sizzling run:

Global X MSCI China Information Technology ETF CHIK

This fund targets the information technology sector of the China stock market by tracking the MSCI China Information Technology 10/50 Index. It holds 41 stocks in its basket with each accounting for single-digit allocation, charging 65 bps in annual fees. The ETF has amassed $1.9 million in its asset base while trading in a paltry volume of 1,000 shares per day on average. It has surged 34.4% so far this year (see: all the Emerging Asia Pacific ETFs here).

VanEck Vectors China SME-ChiNext ETF CNXT

This fund offers exposure to the largest and most-liquid China A-share stocks listed and trading on the Small and Medium Enterprise (SME) Board and the ChiNext Board of the Shenzhen Stock Exchange by tracking the SME-ChiNext 100 index. It holds 100 stocks in its basket with none accounting for more than 6.2% share. The product is unpopular with AUM of $19.4 million and average daily volume of around 9,000 shares. It charges 65 bps in fees per year and has gained 24.4% this year. CNXT has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

KraneShares CSI China Internet Fund KWEB

This product provides concentrated exposure to China’s Internet market by tracking the CSI China Overseas Internet Index. In total, the fund holds 55 securities in its basket with each accounting for single-digit allocation. The ETF has AUM of $1.9 billion and charges 70 bps in annual fees from investors. Volume is solid as it exchanges around 2.2 million shares in hand per day. KWEB has risen 22.8% so far this year and has a Zacks ETF Rank #3 with a High risk outlook (read: China's 2018 GDP Growth 28-Year Low: ETFs That Lost the Most).

Global X MSCI China Consumer Discretionary ETF CHIQ

This product offers exposure to the consumer discretionary sector in China by tracking the MSCI China Consumer Discretionary 10/50 Index. It holds 50 securities in its basket with none making up for more than 9.2% share each. The fund has AUM of $137.3 million and charges 65 bps in annual fees. It has gained 22.4% so far this year and has a Zacks ETF Rank #3 with a Medium risk outlook.

Invesco Golden Dragon China ETF PGJ

This fund follows the NASDAQ Golden Dragon China Index, which offers exposure to the US exchange-listed companies that are headquartered or incorporated in the People’s Republic of China. It holds a basket of 64 stocks with each accounting for less than 8.7% share. The product has AUM of $195 million and trades in average daily volume of 23,000 shares. It charges 70 bps in annual fees and is up 22.1% in the year-to-date timeframe. PGJ has a Zacks ETF Rank #3 with a High risk outlook (read: Best Performing Single-Country ETFs of January).

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