ETF Trends
ETF Trends

China, a country known for its massive exporting capabilities, is starting to experience less demand from abroad, which may translate to a weaker economy and exchange traded funds (ETFs).

Fewer Jobs. Chinese officials have already stated that millions of workers have lost their jobs because there isn’t enough work, and some are quitting early to get that last paycheck in anticipation of widespread bankruptcies, reports Keith Bradsher for The New York Times.

Falling Exports and Imports. Exports were 2.8% smaller in December compared to the same month a year earlier and imports dropped 21.3%. Widespread weakness in global demand is said to be the cause of contracting Chinese exports. China’s trade gap is growing because of its rapid decline in imports versus sales of exports. Analysts predict Chinese exports will continue to shrink and China would eventually show no growth for 2009 compared to 2008.

  • iShares FTSE/Xinhua China 25 Index (FXI): down 16.8% in the last week

ETF FXI performance

The People’s Bank of China has reported that it is holding $1.9 trillion in foreign reserves, with an increase of $40.5 billion in the fourth quarter, which is indicative of China’s continuing willingness to buy U.S. Treasurys and other government debt, writes Andrew Batson for The Wall Street Journal.

The threat of capital outflows has kept China from depreciating its currency despite pressures from exporters who are languishing from decreased demand and want a cheaper yuan. Capital outflows in the fourth quarter are estimated to be around $70 billion. The central bank has continued to keep the yuan at around 6.85 to the U.S. dollar.

  • WisdomTree Dreyfus Chinese Yuan (CYB): up 0.4% in the last week

ETF CYB performance

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.