Why Investors Should Revisit China ETFs | ETF Trends

Amid trade tensions and a broader slump in emerging markets indexes, China exchange traded funds, such as the iShares China Large-Cap ETF (NYSEArca: FXI) and the iShares MSCI China ETF (NYSEArca: MCHI), were drubbed in 2018.

Those ETFs and other China ETFs are on the mend to start 2019, prompting some market observers to encourage investors to revisit stocks in the world’s second-largest economy.

“China is up more than 8% this year (as of 1/28/19), easily outperforming the S&P 500 Index, which is up 5.6%.  We see three reasons for the turnaround and for optimism for Chinese stocks.” said BlackRock in a note out Tuesday.

Easing trade tensions between the U.S. and China, the world’s two largest economies, are bolstering the fortunes of Chinese stocks and ETFs such as FXI and MCHI this year.

“Although tensions are not likely to go away over the long term, we see room for trade frictions to subside in the short run,” said BlackRock. “Both sides have incentives not to escalate the conflict and December’s market volatility in the U.S. stock market has led to wider recognition that trade tensions could hurt domestic business confidence and employment.”

What’s Next for China

Recent data points indicate traders are buying some marquee ETFs tracking developing economies. After the recent pullback in the equities market, bargain hunters may look to beleaguered emerging market stocks and region-related ETFs for value. Many of those ETFs feature China as the largest geographic exposure.