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Signs of Progress in US-Sino Trade Talks Boosts These ETFs

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Providing little relief, President Trump recently talked about a positive development in his dealings with China over trade. However, he did not provide details. Trump and China President Xi Jinping are scheduled to meet in person at the G-20 summit in Argentina in late November.

U.S.-China trade tensions have peaked this year with the Trump administration enacting 25% tariffs on $50 billion of Chinese goods. In retaliation, China mainly targeted American soybeans along with other goods (read: China's Likely Retaliation to US Tariffs & Its Impact on ETFs).

The United States went on to levy more tariffs on Chinese goods worth $200 billion starting Sep 24. This will push up prices on goods ranging from handbags to bicycle tires, per the source. The tariffs, which started at 10%, will shoot up to 25% on Jan 1, 2019.

There were also reports that say that Trump is preparing more tariffs on imports from China worth $257 billion if talks with Xi Jinping see no success. Though nothing has settled on the trade resolution front (as noted by the National Economic Council), there was a certain level of confidence in the market lately.

Below we highlight two ETF areas that gained considerably on progress in U.S.-Sino trade talks.


Semiconductor stocks gained the maximum since 2015 on Oct 25 after three Apple suppliers, NXP Semiconductors (NXPI - Free Report) , Dialog Semiconductor DLGS and Qorvo Inc (QRVO - Free Report) , came up with upbeat earnings. Since semiconductor is one of the most affected by the trade war, indications of positive trade talks soothed investors’ nerves (read: Why October Spells Doom for Semis: ETFs in Focus).

Per Morgan Stanley equity strategists, “semiconductor and semiconductor equipment companies have the highest revenue exposure to China at 52%” and are thus exposed to maximum risks on rising trade tensions. VanEck Vectors Semiconductor ETF (SMH - Free Report) gained 4.8% Nov 1, iShares PHLX Semiconductor ETF (SOXX - Free Report) advanced 4.7% and Invesco Dynamic Semiconductors ETF (PSI - Free Report) rose about 4.3% (read: Apple's iPhone Order Cut Report May Hurt These ETFs).


Industrial Select Sector SPDR ETF (XLI - Free Report) added about 1.8% on Nov 1. Since the manufacturing sector has a direct relation to trade, the sector got a boost. Boeing Co (BA - Free Report) (up 2.3%) and Caterpillar Inc (CAT - Free Report) (up 2.8%) were among the companies that drove the space (read: Industrial ETFs in Focus Post Q3 Earnings).

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