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3 China ETFs Least-Affected by Trade Tensions in 2018
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The year 2018 marked the start of trade tensions between the United States and China. It all started in March after Trump’s ordered duties on steel and aluminum imports followed by his announcement to impose up to $60 billion of import duties on Chinese goods.
China registered a $375-billion trade surplus with the United States in 2017 and the Trump administration is persistently forcing China to reduce that enormous amount by $100 billion. The Trump administration is also reportedly mulling over “imposing investment restrictions on Chinese companies over and above the heightened national security restrictions” (read: Trump Slaps $200B in China Tariffs: ETFs in Focus).
As of date, the United States has slapped tariffs of 10% on $250 billion worth of Chinese products, and has warned tariffs on US$267 billion more. Meanwhile, China has set tariffs on $110 billion worth of U.S. goods, and is threatening qualitative measures that would hit U.S. businesses operating in China hard (read: China's Likely Retaliation to US Tariffs & Its Impact on ETFs).
However, the recent meeting between President Trump and Xi Jinping at G-20 summit in Argentina came as a ray of hope. In Argentina, Trump and Xi agreed to a 90-day truce according to which the Trump administration will not be hiking tariffs to 25% from 10% on $200 billion worth of Chinese goods for another 90 days. The rates were supposed to be raised on Jan 1, 2019.
No wonder, such hostility on the trade front is expected to decelerate China’s already slowing economy further. Investors should note that the Chinese economy grew 6.5% year over year in the third quarter of 2018, missing the market consensus of 6.6%. It marked the lowest growth rate (courtesy of tariff tensions) since the first quarter of 2009 during the global financial crisis (read: China's Manufacturing Stalls in November: ETFs in Focus).
Shares of Chinese companies have also been under pressure this year with VanEck Vectors ChinaAMC SME-ChiNext ETF (CNXT - Free Report) losing about as much as 37% this year (as of Dec 14, 2018). Against this backdrop, let’s take a look at the ETFs that have gained or lost little due to the U.S.-Sino trade tensions.
Global X China Energy ETF— Up 5.4%
The underlying MSCI China Energy IMI Plus 10/50 Index follows a rules-based methodology that is designed to select constituents of the MSCI China Investable Market Index that are classified in the energy sector under the GICS. The fund yields 3.39% annually.
Market Vectors-Renminbi/USD ETN — Up 0.8%
The underlying S&P Chinese Renminbi Total Return Index seeks to track the performance of the Chinese renminbi versus the U.S. dollar. The Index represents an investment in rolling three-month non-deliverable currency forward contracts. Each contract is held until maturity, cash settled and then rolled over into a new contract.
Global X China Industrials ETF (CHII)— Down 9.3%
Though manufacturing in tight spot, the fund lost less than many other products. Its underlying index — the MSCI China Industrials 10/50 Index — reflects the performance of securities that are classified in China.
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3 China ETFs Least-Affected by Trade Tensions in 2018
The year 2018 marked the start of trade tensions between the United States and China. It all started in March after Trump’s ordered duties on steel and aluminum imports followed by his announcement to impose up to $60 billion of import duties on Chinese goods.
China registered a $375-billion trade surplus with the United States in 2017 and the Trump administration is persistently forcing China to reduce that enormous amount by $100 billion. The Trump administration is also reportedly mulling over “imposing investment restrictions on Chinese companies over and above the heightened national security restrictions” (read: Trump Slaps $200B in China Tariffs: ETFs in Focus).
As of date, the United States has slapped tariffs of 10% on $250 billion worth of Chinese products, and has warned tariffs on US$267 billion more. Meanwhile, China has set tariffs on $110 billion worth of U.S. goods, and is threatening qualitative measures that would hit U.S. businesses operating in China hard (read: China's Likely Retaliation to US Tariffs & Its Impact on ETFs).
However, the recent meeting between President Trump and Xi Jinping at G-20 summit in Argentina came as a ray of hope. In Argentina, Trump and Xi agreed to a 90-day truce according to which the Trump administration will not be hiking tariffs to 25% from 10% on $200 billion worth of Chinese goods for another 90 days. The rates were supposed to be raised on Jan 1, 2019.
No wonder, such hostility on the trade front is expected to decelerate China’s already slowing economy further. Investors should note that the Chinese economy grew 6.5% year over year in the third quarter of 2018, missing the market consensus of 6.6%. It marked the lowest growth rate (courtesy of tariff tensions) since the first quarter of 2009 during the global financial crisis (read: China's Manufacturing Stalls in November: ETFs in Focus).
Shares of Chinese companies have also been under pressure this year with VanEck Vectors ChinaAMC SME-ChiNext ETF (CNXT - Free Report) losing about as much as 37% this year (as of Dec 14, 2018). Against this backdrop, let’s take a look at the ETFs that have gained or lost little due to the U.S.-Sino trade tensions.
Global X China Energy ETF — Up 5.4%
The underlying MSCI China Energy IMI Plus 10/50 Index follows a rules-based methodology that is designed to select constituents of the MSCI China Investable Market Index that are classified in the energy sector under the GICS. The fund yields 3.39% annually.
Market Vectors-Renminbi/USD ETN — Up 0.8%
The underlying S&P Chinese Renminbi Total Return Index seeks to track the performance of the Chinese renminbi versus the U.S. dollar. The Index represents an investment in rolling three-month non-deliverable currency forward contracts. Each contract is held until maturity, cash settled and then rolled over into a new contract.
Global X China Industrials ETF (CHII)— Down 9.3%
Though manufacturing in tight spot, the fund lost less than many other products. Its underlying index — the MSCI China Industrials 10/50 Index — reflects the performance of securities that are classified in China.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>