ETF Trends
ETF Trends

The abrupt halt in China’s immense growth has prompted the country’s leaders to step in and provide relief for the ailing economy and, as a result, exchange traded funds (ETFs) targeting the emerging market.

China’s Communist Party has announced a hefty boost in public spending to ease along economic growth as export demand slows and the Central Bank has warned of deflationary risks, report Zhou Xin and Chris Buckley for Reuters UK. The government will spend money on infrastructure projects, social security improvements and expand domestic demand to enhance economic growth.

China’s Central Bank has prioritized the maintenance of stable economic growth by relaxing monetary policies and ensuring sufficient liquidity. The bank will also keep the yuan stable at a balanced level with a more flexible exchange rate.

The Chinese government is distributing around $580 billion in stimulus spending that was previously announced at the end of last year. China’s economic growth has dragged to 6.8% in the fourth quarter from 9% in the third quarter, and 10.1% in the second quarter.

According to TheStockAdvisors for iStockAnalyst, a potential investor should not miss out and have some exposure to the Chinese market when a recovery eventually comes their way. They note three ETFs to play through China’s markets:

  • iShares FTSE/Xinhua China 25 Index Fund (FXI). It covers the largest and most liquid Chinese companies that are available to foreign investors. It is seen as a Chinese version of the Dow.
  • iShares MSCI Hong Kong Index Fund (EWH). This is a broader ETF that covers 85% of publically available capitalizations of the Hong Kong Market. It is similar to our Wilshire 500. There are 44 holdings in the ETF. Financials account for 56%. Utilities make up 19%, industrials 12%, consumer discretionary 9%, tech 1.5%, telecom 1.5% and energy 0.4%.
  • PowerShares Golden Dragon Halter USX China Portfolio (PGJ). This ETF tracks the Halter USX China Index which is made of U.S.-listed companies that get most of their revenue through China.

Carl Delfeld, managing director and global strategist of Chartwell Partners Wealth Management, thinks FXI is poised to fall more, writes Trang Ho for Investor’s Business Daily.

The Finance Minister calculates a deficit of $139 billion, or 3% of GDP. Exports fell 17.5% in January compared to the same month last year. Imports also diminished 43% for the same year-over-year period. The government has vowed to keep an 8% GDP growth target.

If you’re looking into a Chinese-themed country ETF and still don’t know which one you’d like then take a look here for a more in-depth view of other differences.

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.