With Federal Reserve Chairman Jerome Powell paving the way for rate cuts during his testimony to Congress, China’s central bank could essentially follow suit as it must react to its slowing economy.
“If the Fed does go ahead and cut rates, which I don’t think is a given … it simply means the PBoC has a little breathing room to see if the policies it has implemented have an impact on the real economy,” said Hannah Anderson, global market strategist at J.P. Morgan Asset Management.
The Chinese economy is languishing amid a trade war with the U.S. Looser monetary policy would put less pressure on China’s central bank to ease monetary policy.
“If (make that when) the Fed cuts rates then it’s quite likely the PBOC will follow suit,” Leland Miller, chief executive officer of China Beige Book, said in an email.
“But a benchmark interest rate cut is almost purely a symbolic move that won’t affect most corporates,” Miller said, noting that “only a small subset of (state-owned enterprises) pay the benchmark rate, and most of those firms don’t have to repay their loans anyway.”
For exchange-traded fund (ETF) investors looking to get a piece of China, A-Shares represent the country’s biggest and best equities. Furthermore, they represent pure-play opportunities as China continues to expand access to its markets.
Here are three A-Shares ETFs to consider:
- Xtrackers CSI 300 China A-Shares ETF (NYSEArca: ASHR)–up 32.60 percent: seeks investment results that correspond generally to the performance, before fees and expenses, of the CSI 300 Index. The fund will normally invest at least 80% of its total assets in securities of issuers that comprise the underlying index. The underlying index is designed to reflect the price fluctuation and performance of the China A-Share market and is composed of the 300 largest and most liquid stocks in the China A-Share market. The underlying index includes small-cap, mid-cap, and large-cap stocks.
- Xtrackers CSI 500 China A-Shares Small Cap ETF (NYSEArca: ASHS)–up 32.56 percent: seeks investment results that correspond generally to the performance, before fees and expenses, of the CSI 500 Index. The index is designed to reflect the price fluctuation and performance of small-cap companies in the China A-Share market and is composed of the 500 smallest and most liquid stocks in the China A-Share market. Under normal circumstances, the fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in A-Shares of Chinese small-cap issuers or in derivative instruments and other securities that provide investment exposure to A-Shares of Chinese small-cap issuers.
- Xtrackers MSCI China A Inclusion Equity ETF (NYSEArca: ASHX)–up 30.80 percent: The investment seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI China A Inclusion Index. The fund will normally invest at least 80% of its total assets in securities (including depositary receipts in respect of such securities) of issuers that comprise the underlying index. The underlying index is designed to track the equity market performance of China A-Shares that are accessible through the Shanghai-Hong Kong Stock Connect program or the Shenzhen-Hong Kong Stock Connect program.
For more investing trends, visit ETFtrends.com.
