Exchange traded funds that invest in China were lower Monday after the country cut its 2012 economic growth target from 8% to 7.5%, an eight-year low.
Wen Jiabao, China’s premier, also said the nation needs to boost domestic consumption to reduce its reliance on exports.
The inflation target for this year remains at 4%. [ETF Chart of the Day: China and India]
“The growth target indicates the lowest level that the government is comfortable with and is also a signal to local officials that they shouldn’t solely focus on the rate of expansion,” said Michael Buchanan, chief Asia-Pacific economist at Goldman Sachs, in a Bloomberg report. “China’s trend growth rate is coming down but it’s still higher than this — more like around 9%.” [Best Emerging Market ETFs]
The iShares FTSE China 25 (NYSEArca: FXI) was down nearly 2% in Monday’s premarket trading. The China ETF is up 15.5% year to date, compared with a gain of 9.3% for the S&P 500.
The ETF’s “low correlation to the U.S. market makes it a good diversification tool, especially for investors with insufficient exposure to emerging markets,” says Morningstar analyst Patricia Oey.
iShares FTSE China 25