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Should You Buy China ETFs as Coronavirus Cases Wane?
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The world’s second largest economy seems to have finally gained control over the coronavirus outbreak. China has been observing a nominal rate of new infected cases transmitted domestically. In fact, the country witnessed its first locally-transmitted case on Mar 21 after a gap of three days. However, it is still exposed to risks from imported cases. Notably, on Mar 23, China reported no new indigenous COVID-19 cases but witnessed 39 new imported cases. It also marked the fifth consecutive day with no new infections in the former coronavirus epicenter, the Wuhan city. Notably, Wuhan is scheduled to have its two-month lockdown lifted on Apr 8, while the rest of the country is gradually returning to normal life.
Nevertheless, the recently-released reports revealed the impact of the pandemic on China’s economy with industrial output and retail sales plummeting. China saw a 13.5% year-over-year decline in industrial production in the first two months of 2020 compared with the December 2019 rise of 6.9%. The metric, which measures manufacturing, mining and utilities activities, also compared unfavorably with analysts’ expectations of a decline of 3%. China witnessed a 20.5% decline in retail sales, which is a key gauge of consumption in comparison, with growth of 8% last December.
Moreover, the coronavirus pandemic outside mainland China is a concern as slowing global economic growth might result in waning demand. Also, analysts are estimating a contraction in China’s economy in the first quarter of 2020. Deutsche Bank sees the global economy falling into a coronavirus-fuelled recession in the first half of 2020. China’s economy is projected to shrink 31.7% in the ongoing quarter before rebounding sharply in the next. However, March’s data that makes for around about 40% of quarterly economy will play a major role in China’s first-quarter economic growth.
Against this backdrop, investors can keep a tab on a few China ETFs like iShares China Large-Cap ETF (FXI - Free Report) , iShares MSCI China ETF (MCHI - Free Report) , Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR - Free Report) and Invesco Golden Dragon China ETF (PGJ - Free Report) .
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 $3.69 billion and expense ratio is 0.74% (read: ETFs to Suffer as China's Q1 Growth Outlook Gets Gloomier).
This fund tracks the CSI 300 Index. It comprises 302 holdings. The fund’s AUM is $1.72 billion and expense ratio is 0.65%.
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 66 stocks. The product has an AUM of $143.2 million and charges 70 basis points bps in annual fees.
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Should You Buy China ETFs as Coronavirus Cases Wane?
The world’s second largest economy seems to have finally gained control over the coronavirus outbreak. China has been observing a nominal rate of new infected cases transmitted domestically. In fact, the country witnessed its first locally-transmitted case on Mar 21 after a gap of three days. However, it is still exposed to risks from imported cases. Notably, on Mar 23, China reported no new indigenous COVID-19 cases but witnessed 39 new imported cases. It also marked the fifth consecutive day with no new infections in the former coronavirus epicenter, the Wuhan city. Notably, Wuhan is scheduled to have its two-month lockdown lifted on Apr 8, while the rest of the country is gradually returning to normal life.
Nevertheless, the recently-released reports revealed the impact of the pandemic on China’s economy with industrial output and retail sales plummeting. China saw a 13.5% year-over-year decline in industrial production in the first two months of 2020 compared with the December 2019 rise of 6.9%. The metric, which measures manufacturing, mining and utilities activities, also compared unfavorably with analysts’ expectations of a decline of 3%. China witnessed a 20.5% decline in retail sales, which is a key gauge of consumption in comparison, with growth of 8% last December.
Moreover, the coronavirus pandemic outside mainland China is a concern as slowing global economic growth might result in waning demand. Also, analysts are estimating a contraction in China’s economy in the first quarter of 2020. Deutsche Bank sees the global economy falling into a coronavirus-fuelled recession in the first half of 2020. China’s economy is projected to shrink 31.7% in the ongoing quarter before rebounding sharply in the next. However, March’s data that makes for around about 40% of quarterly economy will play a major role in China’s first-quarter economic growth.
Meanwhile, China’s central bank has been taking adequate measures. It recently injected $14.3 billion into the financial system, with the offer of one-year medium-term lending facility loans. The People’s Bank of China has also trimmed the amount of cash a bank must hold in reserve. The move is expected to inject about 550 billion yuan of liquidity into the financial system (read: China ETFs to Gain on New Stimuli to Combat Coronavirus).
ETFs in Focus
Against this backdrop, investors can keep a tab on a few China ETFs like iShares China Large-Cap ETF (FXI - Free Report) , iShares MSCI China ETF (MCHI - Free Report) , Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR - Free Report) and Invesco Golden Dragon China ETF (PGJ - Free Report) .
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 $3.69 billion and expense ratio is 0.74% (read: ETFs to Suffer as China's Q1 Growth Outlook Gets Gloomier).
MCHI
This fund tracks the MSCI China Index. It comprises 603 holdings. The fund’s AUM is $4.54 billion and expense ratio is 0.59% (read: Coronavirus Triggers Market Bloodbath: 7 Hot Inverse ETF Areas).
ASHR
This fund tracks the CSI 300 Index. It comprises 302 holdings. The fund’s AUM is $1.72 billion and expense ratio is 0.65%.
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 66 stocks. The product has an AUM of $143.2 million and charges 70 basis points bps in annual fees.
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 >>