With the MSCI China Index lower by 4.66% over the past week, investors can be forgiven if they’re currently ignoring stocks in the world’s second-largest economy amid the coronavirus backdrop, but some China consumer ideas merit consideration.

For example, the Global X MSCI China Consumer Discretionary ETF (CHIQ) has been slightly les bad than MSCI China Index in recent days and some analysts are pointing to Chinese consumer stocks as beneficiaries of not victims to the COVID-19 outbreak.

CHIQ’s underlying index “incorporates all eligible securities as per MSCI’s Global Investable Market Index Methodology, including China A, B, and H shares, Red chips, P chips, and foreign listings, among others,” according to Global X.

“Many malls and stores remain shut and sales of cars and smartphones are crumbling, but demand for health, entertainment and cosmetics products is buoyant, according to data from e-commerce giant Alibaba Group,” reports Reuters.

CHIQ Conundrum

Some recent data points have shown signs of softness in the world’s second-largest economy, but Beijing is also taking steps to prop up consumption and the local economy. China has been looking to increase internal consumption to reduce the economy’s sensitivity to exports, and those efforts appear to be paying dividends. While some data points indicate the Chinese economy and consumer spending are slowing, policymakers remain proactive.

Other data points indicate Chinese consumers are making purchases of items that can be used at home due to strict travel controls in the country implemented due to COVID-19.

“Sales of yoga mats and rowing machines have also soared, up 250% during a two-week period in February from a year earlier, it said, while sales of books jumped 60% on Alibaba’s Tmall marketplace in the week beginning Feb. 10 compared with the previous week,” reports Reuters.

When it comes to sector ETFs, many investors solely focus on domestic offerings, but there are other ways to tap sector-level opportunities, including China ETFs. Investors considering China sector ETFs should note that there is likely to be dispersion among the various sectors, as is the case with domestic sector ETFs.

“Other Chinese e-commerce sites also had some non-traditional goods among their best-seller rankings. Pinduoduo (PDD.O) noted that haircutting kits and condoms were among its most ten most popular items, while JD.com (JD.O) said sales of baking and roasting equipment had risen 7 times,” reports Reuters.

For more thematic investing trends, visit our Thematic Investing Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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