Exchange traded funds that invest in China have pulled back this week despite the country reporting a nearly 10% jump in gross domestic product for the economy.
China ETFs are in the red for 2011 with several interest-rate hikes by the central bank in an effort to cool rampant inflation. Investors are also worried about a potential “hard” landing for the Chinese economy, which has been an engine of the global recovery.
However, the better-than-expected GDP growth and solid June industrial data are good signs for China ETFs.
China’s economy expanded at a 9.5% rate in the second quarter, which was slightly above the market’s expectation of 9.3%, but down from the 9.7% jump in the first quarter, reports Aaron Back for The Wall Street Journal. Faster services growth and restocking of industrial products helped boost China’s GDP.
Industrial growth surged to a better-than-expected 15.1% in June year-over-year, up from the 13.3% increase in May.
The People’s Bank of China is expected to maintain tight monetary policies for another quarter, then turn to a neutral stance in the fourth quarter, said Qu Honbin, analyst at HSBC. [China ETFs Wrestle with Rate Hikes, Inflation.]