China notched the largest trade surplus in 18 months last month. The surprising figures may portend tough times have a mixed impact on exchange traded funds (ETFs).
The surplus could turn up the heat on Beijing to allow the yuan to appreciate faster. They also signal that economic activity in China is leveling off and the stimulus impact is on the wane. One result of the stimulus was that China imported raw materials at a furious pace, report Aaron Beck and Esther Fund for The Wall Street Journal.
If that is indeed slowing, the effect could be felt in several funds, particularly those tracking the performance of industrial and base metals, which are heavily used in construction. Shipping may also feel some pressure:
- First Trust ISE Global Copper Index (NYSEArca: CU)
- Market VEctors Steel (NYSEArca: SLX)
- SPDR S&P Metals & Mining (NYSEArca: XME)
- Claymore Delta Global Shipping (NYSEArca: SEA)
Analysts expect a further slowdown in property investment in the coming months, although it remains strong for now. Analysts said the resilience of property prices indicates Beijing won’t be eager to loosen its measures to cool the sector.
- Claymore/Alpha China Real Estate (NYSEArca: TAO)
The numbers also have sparked concern that consumer spending in China has leveled off somewhat. If this is the case, it may become evident in Global X China Consumer (NYSEArca: CHIQ). [ETF Plays on the World’s Second-Largest Economy.]
Analysts feel that the yuan could be seeing gains in the coming months, although China says it will let market demand dictate that. Since Beijing announced on June 19 that it would let the yuan be flexible, it has risen 0.77% against the U.S. dollar.
- Market Vectors Chinese Renminbi (NYSEArca: CNY)
- WisdomTree Dreyfus Chinese Yuan (NYSEArca: CYB) yuan could keep getting stronger
For more stories about China, visit our China category.
Tisha Guerrero contributed to this category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.