The Case for China ETFs
November 23rd at 8:22am by Tom Lydon
The latest data out of China indicates that it may be time to get back into focused exchange traded funds, although the Chinese stock market is down around 40% from highs seen in 2009.
“It is probably not a coincidence that these improving data points coincided with the meeting of China’s 18th Party Congress last week when new leaders for the next 10 years were selected. Improving economic figures were certainly buoyed by government-mandated infrastructure spending earlier this year. During the transition period before the new leaders assume power in March next year, the government will likely continue to use stimulus spending, as needed, to keep the economy humming,” Patricia Oey wrote for Morningstar. [China Data Strengthens: Time to Get Back into ETFs?]
The new leadership is coming from a younger, more liberal generation that is likely to have a positive impact upon the local economy. Investors can expect reforms for interest rates, yuan appreciation and policies that will support growth and domestic consumption, reports Oey. Industrial production is steady at 9% and has not been trending down and retail sales are up 14% in 2012 up through October. The current GDP rate of 7.4% recorded in the third quarter is anticipated to be the lowest, as the economy now has the necessary momentum to continue growth at a decent pace. [ETF Chart of the Day: China]
Overall valuations of the stock market in China are at all-time lows, which means that there is downside protection. Furthermore, the approval process of direct foreign investment into the Chinese stock market is under a regulatory approval process which will help quicken the entire process. [China ETF Trading Picks up on Rally, Leadership Transition]
ETFs for China exposure:
- iShares MSCI Hong Kong Index (NYSEArca:EWH)
- iShares MSCI Taiwan Index (NYSEArca: EWT)
- SPDR S&P China (NYSEArca: GXC)
- iShares MSCI China (NYSEArca: MCHI)
- iShares FTSE China 25 Index (NYSEArca: FXI)
iShares FTSE China 25 Index
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.