China released its second-quarter figures on Monday, which revealed that its economy slowed to 6.2 percent, which represents its weakest rate in at least 27 years. The primary culprit for the slowdown was unsurprisingly the U.S.-China trade war as negotiations took a turn for the worse in the month of May.
Between April and June, however, China’s economy actually grew 6.2 percent compared to a year ago, according to the country’s statistics bureau. That figure fell in line with the expectations of analysts polled by Reuters, but less than the 6.4 percent year-on-year growth in the first quarter of 2019.
“Uncertainty caused by the US-China trade war was an important factor and we think this will persist, despite the recent tariff truce, ” said Tom Rafferty, principal economist for China at The Economist Intelligence Unit.
“Businesses remain skeptical that the two countries will reach a broader trade agreement and recognise that trade tensions may escalate again,” wrote Rafferty in a note on Monday.
China ETFs a Value Proposition?
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. 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.
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.
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