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Can China ETFs Shine Bright on Solid Economic Data?

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The world’s second-largest economy has again grabbed investor attention with new rounds of positive economic data releases. The data puts the spotlight on China’s rapid and very impressive rebound from the pandemic-led economic slowdown.

Economic Data in Detail

There was a 35.1% year-over-year rise in industrial output in the January-February period, per a Reuters article. The metric compares favorably with December’s 7.3% growth. It also surpassed economists’ forecast of 30% year-over-year growth, according to a Reuters’ poll.

Moreover, retail sales were up 33.8% year over year in the first two months of 2021.  The figure also compares favorably with 4.6% growth in December and holds strong against a contraction of 20.5% in the months of January and February in 2020. Furthermore, the metric beat the analysts’ estimate of 32% growth, per a Reuters’ poll.

Moving on, fixed-asset investments gained 35% year over year in the January-February period. However, the metric lagged the forecast of a 40% rise. Meanwhile, the same compared favorably with a 24.5% contraction in January-February 2020.

It is worth mentioning here that the China government had imposed some travel restrictions to curb the spread of coronavirus cases before the Lunar New Year holidays, per a BloombergQuint article. Resultantly, labors remained in factories and industrial production didn’t have to face the holiday-induced slump. However, some consumer discretionary sectors like traveling, restaurant and leisure and entertainment-bound spending saw some sluggishness.

Studying the data, Louis Kuijs, head of Asia economics and Oxford Economics, commented, “We have a positive outlook for exports and manufacturing investment this year. And we expect household consumption to become a key driver of growth from Q2 onwards as confidence improves and the government’s call to reduce travel is toned down,” as mentioned in a Reuters article.

Moving on, China’s exports in dollar terms surged 154.9% year over year in February. The country’s exports climbed 60.6% year over year in the January-February period, surpassing analysts’ estimate of a 38.9% increase, per a Reuters’ poll.

China’s exports received support from high demand for medical products like personal protective equipment (PPE) and electronics products like fridges, toasters and microwaves on surging meeting work-from-home needs, as mentioned in a Reuters article.

China’s trade surplus with the United States was $51.26 billion in January-February 2021 in comparison to $29.92 billion in December 2020, per a Reuters article.

According to data from the National Bureau of Statistics, China’s GDP grew 6.5% in the fourth quarter of 2020, after 4.9% growth in the third quarter. The metric also beat economists’ forecast of 6.1% growth, per a Reuter’s poll. Notably, the world’s second-largest economy recorded economic growth of 2.3% in 2020. There is no doubt in the fact that China’s economy has come a long way from the steep 6.8% fall in the first three months of 2020. As mentioned in a BloombergQuint article, analysts expect China to see growth of 8.4% in 2021.

China ETFs That Can Gain

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 598 holdings. The fund’s AUM is $6.78 billion and expense ratio, 0.59% (read: Alibaba Solid Fiscal Q3 Earnings Put These 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 $4.01 billion and expense ratio is 0.74% (read: Top Foreign ETFs of 2020 That Are Up At Least 40%).

ASHR

This fund tracks the CSI 300 Index. It comprises 298 holdings. The fund’s AUM is $2.67 billion and expense ratio, 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 820 holdings. The fund’s AUM is $1.90 billion and expense ratio is 0.59% (read: ETFs in Focus on Alibaba's Strong Fiscal Q2 Earnings).

CNYA

The fund tracks the MSCI China A Inclusion Index. It comprises 470 holdings. The fund’s AUM is $674.6 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 70 stocks. The product has an AUM of $351.7 million and charges 70 basis points in annual fees.

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