Chinese exchange traded funds (ETFs) received a fresh boost from China’s recent decision to tighten credit for the sixth time this year. To achieve this, banks were ordered to reduce the amount of lending money by increasing their reserves. The reserve increase will go into effect Aug. 15, according to Joe Mcdonald for the Associated Press.
Not surprisingly, PowerShares Golden Dragon Halter USX China (PGJ), iShares FTSE/Xinhua China 25 Index (FXI) and SPDR S&P China (GXC) are enjoying an upswing since late last week, as you can see from the chart below. FXI is up 19.9% year-to-date, PGJ is up 22.5% year-to-date and GXC is up 25.8% for the last three months as it just launched in March.
Chinese government leaders must walk a fine line to keep the blazing economy in check. Communist leaders want overall growth high to reduce poverty, but without being so high as to incur inflation or a debt crisis. To avoid stifling growth, China instituted investment curbs and small rate hikes. The interest rate already has been raised three times this year. For now, all the checks and balances seem to be making a positive impact on ETFs and the economy.
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.