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ETFs in Focus as Deputy-Level U.S.-China Trade Talks Begin

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Investors will be anxiously awaiting the outcome of the two-day meeting starting Sep 19, between the deputy trade officials from two of the world’s largest economies. This meeting will prepare grounds for another round of talks at the start of October. The outcome of this meeting will also offer hints on the future course of the trade war (read: ETF Winners as Sino-US Trade War Tensions Ebb).

Details on the Meeting

While a convoy of 30 officials, led by Vice Finance Minister Liao Min, will represent China, Deputy USTR Jeffrey Gerrish will be leading the U.S. delegation. Per a Reuters’ article, two negotiating sessions will be held on China’s purchase of U.S. agricultural products like soybeans. Moreover, a session focusing on boosting China’s intellectual property protections and halting unwanted transfers of U.S. technology to Chinese firms will be conducted. The issue of lowering Chinese shipments of synthetic opioid fentanyl to the United States is also on the list. China is also planning to discuss the Huawei ban in the meeting (read: Low-Volatility ETFs to Sail Through Trade War Uncertainty).

China’s Current Economic State

How crucial this meeting is for Chinese officials can be well depicted by the state of China’s economy. China’s data for August have disappointed investors once again. The world’s second-largest economy continues to grapple with slackening domestic demand and tough external conditions. From investment gauges, retail sales to industrial output growth, the weakness was widespread. In fact, industrial output growth in August had been the slowest in 17 and a half years. Notably, China’s exports to the United States fell 16%  year over year in August compared with a decline of 6.5% in July (read: ETFs in Focus as China's Economic Slowdown Persists).

U.S. Economy Doing Well

The U.S. economy — presently at its historically-longest 11th year of expansion — has successfully maintained momentum. Majority of consumer-centric, business-centric and labor market data for August clearly indicated an improving U.S. economy but at a slow pace, extinguishing recessionary fears. Manufacturing output, which accounts for 11% of the U.S. economy, increased 0.5% in August as against an unrevised 0.4% decline in July. The metric also surpassed analysts’ forecasts of a 0.2% rise, according to a Reuters’ poll. The upside was driven by a rise in production levels of machinery and primary metals (read: Industrial ETFs in Spotlight as U.S. Manufacturing Picks Up).

Looking Forward

Trump recently postponed the planned tariff increase of 5% on $250 billion of Chinese goods from Oct 1 to Oct 15 as “a gesture of goodwill.” The tariff delay request was made by the Vice Premier of China, Liu He, due to the 70th anniversary of the People’s Republic of China on Oct 1. Also, China announced renewed purchases of U.S. farm goods. Per the source, China has purchased a minimum of 10 cargoes, or 600,000 tons, of U.S. soybeans for October-December shipment. Beijing has also announced its first batch of tariff exemptions for 16 types of U.S. products, including some anti-cancer drugs and lubricants, as well as animal feed ingredients, including whey and fish meal, according to a Ministry of Finance statement. Such pleasant exchanges between the countries are hinting at positive trade talks. However, adding to the uncertainty, Trump recently commented that there may be a trade deal either before or after the U.S. presidential election.

ETFs to Watch Out

US Agricultural/Livestock ETFs

The U.S. agricultural sector has been hit the worst by the trade war. However, the latest developments might bring some relief to the sector. Thus, investors can keep an eye on ETFs like Teucrium Wheat Fund (WEAT - Free Report) , MLCX Grains ETN , iPath Bloomberg Grains Subindex Total Return ETN and iPath Dow Jones-UBS Livestock Subindex Total Return ETN COW (see: all the Agricultural ETFs here).

Semiconductor ETFs

Meanwhile, let’s take a look at some of the semiconductor ETFs that can gain from cooling down of the trade war. iShares PHLX Semiconductor ETF (SOXX - Free Report) , VanEck Vectors Semiconductor ETF (SMH - Free Report) , Direxion Daily Semiconductors Bull 3x Shares (SOXL - Free Report) and ProShares Ultra Semiconductors USD can be given a thought.

Growth ETFs

Growth stocks refer to those that are likely to witness revenue and earnings growth faster than the industry. As such, growth funds tend to outperform during bullish phases. While there are a wide range of choices in the growth ETF world, we have highlighted five funds that offer broad-based exposure to the U.S. stock market like Vanguard Growth ETF (VUG - Free Report) , Schwab U.S. Large-Cap Growth ETF SCHG, iShares Core S&P U.S. Growth ETF (IUSG - Free Report) , SPDR S&P 500 Growth ETF SPYG and Vanguard Mega Cap Growth ETF MGK.

China ETFs

Investors can also keep a tab on a few China ETFs like iShares China Large-Cap ETF (FXI - Free Report) , iShares MSCI China ETF (MCHI - Free Report) , Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR - Free Report) and Invesco Golden Dragon China ETF (PGJ - Free Report) .

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