Some well-known China exchange traded funds surged Thursday after the People’s Bank of China followed the Federal Reserve in raising borrowing costs.
In fact, 260 ETFs hit 52-week highs yesterday, 10 of which were China funds and that does not include a broad swath of diversified emerging markets ETFs with significant exposure to the largest developing economy.
Investors interested in accessing China’s markets have a number of options available. For instance, the iShares China Large-Cap ETF (NYSEArca: FXI) and SPDR S&P China ETF (NYSEArca: GXC) track Chinese companies listed on the Hong Kong stock exchange.
Investors can access Chinese markets directly through options like the VanEck Vectors ChinaAMC SME-ChiNext ETF (NYSEArca: CNXT), VanEck Vectors ChinaAMC CSI 300 ETF (NYSEArca: PEK), iShares MSCI China A ETF (BATS: CNYA) and db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR).
“The PBoC raised the interest rates it charges commercial banks in the money market on the seven-day, 14-day and 28-day loans–also known as reverse repurchase agreements or repos–each by 0.1 percentage point with the 7-day rate at 2.45% from 2.35%. The PBoC raised the interest rate by 0.1 percentage point on a form of special loans to 22 financial institutions known as a medium-term lending facility,” reports Shen Hong for Barron’s.
Ongoing reforms, notably from the supply side, could further support Chinese economic growth. Reforms have bolstered industrial profitability and strengthened commodity prices. China’s exporters are also enjoying improvements from a rebound in global trade.
The Chinese economy is also shifting towards domestic-oriented consumption as a main growth driver. Consequently, consumption-driven sectors liek technology and services are becoming a growing component in the economy.
“But PBOC rate moves don’t follow a regular schedule and the timing, just hours after the US Fed tightened, suggests policymakers may also have hoped the move could help stabilise the renminbi. In the event, the dollar has weakened against most major currencies today, but the PBOC’s caution is understandable. Capital outflows have tended to increase when the renminbi has weakened against the US currency,” according to a Capital Economics note posted by Dimitra DeFotis of Barron’s.
FXI, the largest China ETF trading in the U.S., is up nearly 12% year-to-date.
For more information on the Chinese markets, visit our China category.
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.