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China ETFs to Shine Bright on Solid Exports Data for November

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The world’s second-largest economy seems to be recovering well from the pandemic-driven economic slowdown. With support from strong global demand for coronavirus outbreak-related goods, the country’s export levels increased at the fastest pace since February 2018 in November, per a Reuters article. Moreover, amid the globally worsening health crisis, China’s trade surplus jumped to a monthly record high.

China’s exports climbed 21.1% year over year in November, comparing favorably with the 11.4% rise recorded in October. Meanwhile, imports rose 4.5% from the previous year in November versus a rise of 4.7% in October. However, the metric delivered a third consecutive month of growth. Notably, export levels beat analysts’ expectations of a year-over-year increase of 12% while imports lagged projections of a 6.1% rise in the same period, per a Reuters’ poll. Notably, trade surplus in November came in at $75.42 billion (the largest since at least 1981) in comparison to analyst expectation of $53.50 billion, per a Reuters’ poll. It also compares favorably with a $58.44-billion surplus in October.

According to Nomura analysts, China’s export level has been driven by growing global demand for personal protective equipment (PPE) and electronics products like fridges, toasters and microwaves for meeting work-from-home needs as well as seasonal Christmas demand, as mentioned in a Reuters article. Moreover, increasing domestic demand and rising commodity prices have lent support.

A Bloomberg article mentions that China saw a 42.5% year-over-year rise in dollar terms in exports of medical equipment during the January-November period, whereas electronic shipments in November rose 25% in comparison to the same month last year.

Notably, China’s trade surplus with the United States widened to $37.42 billion in November from $31.37 billion in October, per a Reuters article.

Meanwhile, president-elect Joe Biden is expected to have a similar take on China as a threat to America’s supremacy in technology and as a global power as the Trump administration. Nonetheless, the ground on which Biden’s approach is going to be different than Trump’s administrations will be ‘diplomacy’. Biden plans to work along with allies like Japan, Europe and others to build pressure on China in order to impose market-friendly trade practices and reform some World Trade Organisation rules, per a CNBC article.

Biden is facing pressure from labor unions demanding job protections and creations and progressives, which are camping for suitable actions on climate change, reduced drug prices and human rights, per a CNBC article. Meanwhile, farmers and U.S. corporations have been lobbying for more lenient trade policies with China and tariffs cuts. Thus, experts believe the initial phase of the Biden administration is expected to maintain the tariffs imposed by Trump.

Going by The Wall Street Journal article, Biden has expressed interest in working along with China on some global concerns like the coronavirus pandemic and climate change. Biden has also campaigned highlighting that his tenure will mark greater emphasis and investments on important sectors like biomedicines, robotics and clean energy. The Biden government will also strive hard to maintain United States’ leadership in the technological sector in comparison to arch rivals like China and put a curb on malpractices performed by the latter, according to The Wall Street Journal article.

China ETFs in Focus

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

MCHI

This fund tracks the MSCI China Index. It comprises 611 holdings. The fund’s AUM is $6.41 billion and expense ratio is 0.59% (read: ETFs in Focus on Alibaba's Strong Fiscal Q2 Earnings).

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 $4.04 billion and expense ratio is 0.74% (read: Winning ETF Areas After First Presidential Debate).

ASHR

This fund tracks the CSI 300 Index. It comprises 300 holdings. The fund’s AUM is $2.52 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 768 holdings. The fund’s AUM is $1.74 billion and expense ratio is 0.59%.

CNYA

The fund tracks the MSCI China A Inclusion Index. It comprises 482 holdings. The fund’s AUM is $564.5 million and expense ratio is 0.60%.

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 68 stocks. The product has an AUM of $218.6 million and charges 70 basis points in annual fees.

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