China ETF Picks Up Momentum as Economy Recovers | ETF Trends

China’s country-specific exchange traded funds are gaining momentum as supportive government policies and reopening of some overseas markets help the emerging economy picks up momentum.

The Xtrackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR), which tracks the CSI 300 Index or the top 300 stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange, increased 9.1% over the past month, compared to the 1.8% gain for the S&P 500 Index.

While the world’s second-largest economy is still far from a full recovery from the coronavirus pandemic hit, economist remain hopeful that a series of increased economic momentum indicates China is returning to positive growth in the second quarter, the Wall Street Journal reports.

For instance, China’s official manufacturing purchasing managers index rose to a three-month high of 50.9 in June from 50.6 in May. Meanwhile, the separate nonmanufacturing PMI, a gauge of services and construction activity, advanced to a seven-month high of 54.4 from 53.6 in May. Both indices have locked in four consecutive months of readings above 50, which indicates an expansion in the sector.

“China’s economic recovery is showing signs of acceleration,” Zhang Liqun, an analyst with the China Federation of Logistics & Purchasing, told the WSJ.

While the export and import industries remain in a contraction, the segment has improved from the post-pandemic lows. The new export orders subindex, a gauge of external demand, rose to 42.6 in June from 35.3 in May, while the subindex measuring imports also gained to 47.0 from 45.3 in May. Fan Lei, a Shanghai-based economist for Sealand Securities, argued that China’s exports benefited from the production of medical equipment to fight the coronavirus, and exports of other types of goods have recently added to the rebound.

Due to the rosier outlook and improving economic strength, Nomura economists recently raised their forecast for China’s second-quarter GDP growth to 2.6% from 1.2%. However, they warned that a cluster of new infections that emerged in Beijing in mid-June hadn’t been fully reflected in the data and could cut the pace of recovery.

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