Chinese markets and country-specific ETFs have plunged as a result of the escalating U.S. and China trade war conflict, but the selling may have been overdone.
“The trade war is bad, but we think this may be overdone. How is China A-shares down so much?” Robert Bush, ETF Strategist for DWS, told ETF Trends in a call.
The Xtrackers Harvest CSI 300 China A ETF (NYSEArca: ASHR), the largest China A-shares related ETF, decreased 17.0% year-to-date.
After the selling, “we argue that this is an opportunity. It is starting to look like an overreaction,” Bush said.
ASHR now trades at a 11.9 price-to-earnings and a 1.6 price-to-book, compared to the S&P 500’s 17.1 P/E and a 2.9 P/B.
Trade War: A Knee-Jerk Reaction?
The trade war selling may be seen as a knee-jerk reaction that has gone to the extreme. While the U.S. has threatened to ramp up restrictions on $200 billion in Chinese imports, the total amount is only a drop in the bucket for China’s overall export revenue streams, Eric Legunn, ETF Strategist for DWS, explained to ETF Trends.