The weak growth that China is experiencing has weighed on the global economy more than anticipated. In turn, Chinese-focused exchange traded funds, along with oil and the commodity sector, have suffered.
The iShares FTSE China 25 Index (NYSEArca: FXI) has seen recent outflows, with investors taking out 2.4% of the funds’ total assets, leaving around $5.2 billion in the coffers, according to a recent report. [Oil ETF Down 30% From 2012 High]
“China has the monetary and fiscal tools to re-ignite growth and we expect them to be used effectively in the second half of the year. However, from a U.S. perspective, slower Chinese growth comes with a major silver lining – namely lower commodity prices,” David Kelly, chief global strategist at J.P. Morgan Funds, wrote.
ETFs that track commodities performed below average for the first half of the year. Energy ETFs were down 12.3%, while global and natural resources fell 11.3%, reports Donna Mitchell for Financial Planning.[ETFs to Hedge Profit from Higher Oil Prices]
“I think people worry about a slowdown in the Chinese economy,” Jeff Tjornehoj, research analyst at Lipper, said. “Fear of a slowdown there has sent earthquake tremors through the commodities market.” [Rate Cut Stokes Chinese ETFs]
For the second quarter, crude oil prices have dropped about 20.4%, the steepest drop since 2008, the height of the credit crunch. As the crude oil supply is pent up in the U.S. there seems to be no real demand around the corner. China’s export and manufacturing numbers are low, and India’s economic growth has ceased. Lastly, the growth in the U.S. is sluggish, not leaving much room for oil prices to run.
However, crude oil prices have rebounded the past two weeks after falling below $80 a barrel.
United States Oil Fund (NYSEArca: USO)
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.