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Can China ETFs Gain on New Stimulus to Combat Covid-19?

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The coronavirus outbreak is showing no signs of dissipating any time soon. The outbreak has already claimed around 1,868 lives in China, along with 72,436 confirmed cases. However, the world’s second largest economy is exercising all-sort of measures to minimize the impact of coronavirus on human resources as well as the economic front. Accordingly, the People's Bank of China (PBOC) lowered the interest rate on its medium-term lending on Feb 17. This can provide support for cutting the country's benchmark loan prime rate (LPR). The decision on the LPR will be announced on Feb 20 (read: Coronavirus Puts These Country ETFs on High Alert).

Moreover, in order to add some liquidity into the financial system, China's central bank injected 100 billion yuan (or around US$14.33 billion) into the market on Monday. Also on Feb 14, China's securities commission announced some changes to the refinancing rules for listed companies, mainly to enhance liquidity largely for small- and medium-cap stocks (read: Safe-Haven ETFs Rally as Coronavirus Cases Surge).

Apart from these, Beijing has announced new tariff exemptions on imports from the United States for around 696 products that includes important agricultural and energy products, such as pork, beef, soybeans, liquefied natural gas and crude oil. The list also includes denatured ethanol and some wheat, corn and sorghum, some medical devices, along with metals, including copper ore and concentrates, copper scrap and aluminum scrap. Notably, the move comes at a time when speculations regarding China’s inability to meet its commitments under the phase one trade deal due to the coronavirus outbreak has been making rounds

ETFs that May Shine

Beijing’s efforts to support the economy and the affected companies due to the coronavirus outbreak have helped the country’s stocks to recoup their losses. In fact, the Shanghai Composite index was up around 2.3% on Feb 17, marking its largest daily percentage gain since June 2019. Also, witnessing its best daily performance in around close to a couple of weeks, the blue-chip CSI 300 index rose roughly 2.3% on the same day.

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

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 $4.64 billion and expense ratio is 0.74%. It has lost 1.7% in the past month (read: Can China ETFs Survive the Coronavirus Onslaught?).

MCHI

This fund tracks the MSCI China Index. It comprises 594 holdings. The fund’s AUM is $5.07 billion and expense ratio is 0.59%. It has lost 0.3% in the past month (read: 10 ETFs for 2020).

ASHR

This fund tracks the CSI 300 Index. It comprises 302 holdings. The fund’s AUM is $2.19 billion and expense ratio is 0.65%. It has lost 4.2% in the past month (read: January Sends Warning for 2020: Play Quality ETFs & Stocks).

PGJ

This fund follows the NASDAQ Golden Dragon China Index, which offers exposure to the U.S. exchange-listed companies that are headquartered or incorporated in the People’s Republic of China. It holds a basket of 66 stocks. The product has an AUM of $201.9 million and charges 70 basis points (bps) in annual fees. It has gained 0.2% in the past month.

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