China is facing an inflationary trend, and exchange traded funds (ETFs) from competing countries might be able to gain an edge against one of their biggest competitors. Thus far, Chinese growth has relied upon low prices with high top-line sales growth. Low-cost Chinese imports allowed a way to keep inflation at bay.
Carl Delfed for Forbes says the deflationary impact of China on world markets is now becoming an inflationary red flag with implications for global investors. Wages have begun an upward climb, energy is expensive and food prices and demand are exploding. The Chinese Consumer Price Index (CPI) was up 8.7% in just one year.
Delfeld recommends a lean toward countries that are net exporters of commodities instead of net importers like China. iShares MSCI Brazil (EWZ) or the iShares MSCI Hong Kong (EWH) present better opportunities than the iShares FTSE/Xinhua China 25 Index (FXI) ETF.
China’s inflationary pressures will create opportunities for other emerging market countries to pick up the slack, such as India. India has two ETFs right now: the PowerShares India (PIN) and Wisdom Tree India Earnings (EPI).
This is an ever-evolving situation, so keep an eye on it. Once these areas head above their trend lines, they could be worth a look.
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.