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China ETFs to Gain on Positive Trade Data Amid Coronavirus Crisis

China’s export and import data for June 2020 looks encouraging. China’s exports climbed 0.5% in June against the 3.3% decline in May (per a Reuters article). Meanwhile, imports rose 2.7% in June for the first time since the coronavirus crisis against a fall of 16.7% in the previous month. Both the metrics beat analysts’ expectations of a year-over-year decrease in exports of 1.5% and imports of 10%, per a Reuters report. Notably, trade surplus in June totaled $46.42 billion in comparison with a surplus of $62.93 billion in May.

Moreover, China’s imports from the United States reversed a double-digit declining trend witnessed after the coronavirus pandemic and increased 11.3% in June, per a Reuters article. Going on, Beijing’s trade surplus with the world’s largest economy widened to $29.41 billion in June from $27.89 billion in May.

What’s Behind the Numbers?

China’s imports are gaining from reopening of the economy as there is a rise in demand for commodities on support from government stimulus (per a Reuters article). Notably, imports of iron ore rose to the highest level in 33 months in June on increasing demand and shipments from miners. Moreover, Beijing’s crude oil imports touched an all-time high level as oil prices declined.

China Shows Encouraging Manufacturing Levels

The world’s second-largest economy also reported encouraging manufacturing activity data. China’s official Purchasing Manager’s Index (PMI) reading for June has managed to surpass expectations in spite of the odds. The PMI for June came in at 50.9, beating analysts’ expectations of 50.4 (per a Reuters’ poll). The metric compares favorably with 50.6 seen in May. Notably, PMI readings above 50 indicate expansion.

Analysts believe that rise in new export orders is supporting the encouraging data. The index measuring new export levels came in at 42.6 for June against May’s 35.3, per a CNBC article. However, the metric is still in contracting territory. Meanwhile, China’s official non-manufacturing PMI was 54.4 in June, comparing favorably with 53.6 in May.

Will China’s Economic Recovery Continue?

As the economy is reopening, China is seeing an uptick in domestic demand. However, the country is exposed to the risks of waning international demand as the coronavirus outbreak is wreaking havoc globally. As the number of coronavirus cases has crossed the grim mark of 13 million globally, it is being feared that the economies may pause the reopening process and impose lockdown measures to control the spread of the virus. Such a move will most likely hurt the import and export levels of China.

China ETFs to Gain

Against this backdrop, investors can keep a tab on a few China ETFs like iShares MSCI China ETF MCHIiShares China Large-Cap ETF FXIXtrackers Harvest CSI 300 China A-Shares ETF ASHRSPDR 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 610 holdings. The fund’s AUM is $6.10 billion and expense ratio is 0.59% (read: Alibaba Tops Fiscal Q4 Earnings: ETFs in Focus).

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 $3.45 billion and expense ratio is 0.74% (read: Crude Plunges Again: Country ETFs to Win/Lose).

ASHR

This fund tracks the CSI 300 Index. It comprises 308 holdings. The fund’s AUM is $1.92 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 729 holdings. The fund’s AUM is $1.35 billion and expense ratio is 0.59%.

CNYA

The fund tracks the MSCI China A Inclusion Index. It comprises 474 holdings. The fund’s AUM is $447.6 million and expense ratio is 0.60% (read: Are China ETFs at Risk as Economy Shrinks on Coronavirus Blows?).

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 63 stocks. The product has AUM of $200.3 million and charges 70 bps in annual fees.

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iShares MSCI China ETF (MCHI): ETF Research Reports
 
iShares China LargeCap ETF (FXI): ETF Research Reports
 
SPDR SP China ETF (GXC): ETF Research Reports
 
Xtrackers Harvest CSI 300 China AShares 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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