Single-country exchange traded funds tracking Chinese stocks, including the iShares China Large-Cap ETF (NYSEArca: FXI) and the iShares MSCI China ETF (NYSEArca: MCHI), are among the better-performing emerging markets ETFs this year, but with Chinese stocks having rallied in a short amount of time, some market observers are urging investors to be selective with this asset class.

Chinese markets and country-specific ETFs surged Monday after President Donald Trump pushed off the tariff deadline, pointing to progress in the trade talks with China and announcing a “signing summit” with Chinese President Xi Jinping.

Investors appear to be embracing the ideas that the dollar will weaken this year and that the Federal Reserve will slow its pace of interest rate hikes or that no rate increases at all will be delivered in 2019. China’s efforts to stimulate its massive economy also make the case for considering the country’s equity markets.

Some of the factors that hindered Chinese stocks last year are turning for the better.

“Chinese monetary stimulus is arriving, hopes are running high for a trade deal and the Fed has hit the pause button. Yet A-shares still trade at a hefty discount to other emerging market (EM) equities, and to their own history. This suggests potential for further gains,” said BlackRock in a recent note.

The iShares MSCI China A ETF (CBOE: CNYA) is among the ETFs investors can use to access A-Shares.

Trade Progress

Trump was very optimistic in the direction of the talks, hinting that at the prospect of a summit “to conclude an agreement” with China’s Xi should progress continue.

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