This week saw the KraneShares CSI China Internet ETF (KWEB) and the iShares MSCI China ETF (MCHI) down a few points. On “The Claman Countdown” on Fox Business Network on Thursday, ETF Trends CEO Tom Lydon joined fill-in host Cheryl Casone to discuss why China may be a problem for ETF investors.
As Lydon states, while having a pretty strong record in recent months, recent developments have put China under the radar. The Biden administration has not backed off on trade tariffs, and recent news regarding labor may cause some problems for Chinese companies as well.
With that in mind, one of the problems also has to do with the fact that the SEC is looking at Chinese companies, and they are not necessarily adhering to U.S. accounting standards. This is not the first time this has come up, but there may be a more serious handle on things with the new SEC head chairman. This could result in delisting some of these Chinese companies from U.S. exchanges, which will be a problem for ETFs, as they’ll have to remove them from the Indexes.
Lydon continued, “A lot of things not really lining up well for China investors now. Also, if you look at the ETFs and the amount of flows that would have been seen going into China, that’s going to be an added concern.”
Rates Getting Energized
Moving onto the subject of energy, with regards to the Suez Canal, where a cargo vessel has been stuck, oil has, in turn, become extremely volatile over the last couple of days. With that said, energy and financial ETFs such as the Energy Select SPDR Fund (XLE) have been performing quite well.
As Lydon states, with more businesses opening up, simple things such as traffic jams are beginning to occur — meaning more gas is being purchased. Essentially, the demand for oil is growing. Opening up around the world, the higher oil demand is going to be great for energy companies.
Looking at financials, Lydon explains how the market has seen rates slowly rising. Today there was an announcement that mortgage rights are beginning to rise as well. Housing demand is strong too, which is good for banks, making them far more profitable.
As far as what ETFs to look into, in addition to XLE, there’s the Vanguard Financial ETF (VFH), which are both great to look into for this sector. For investors, it’s wise to pick and choose opportunities. See what’s been working for businesses this past year that owners will continue to embrace.
For more market trends, visit ETF Trends.