China’s gross domestic product (GDP) contracting for the first time during the first quarter due to the coronavirus pandemic was certainly a wake-up call for the country’s leaders to start implementing some economic reforms–something that could help prop up China-focused exchange-traded funds (ETFs) given the right moves.
“Media headlines outdid each other in broadcasting China’s 6.8% contraction in GDP in the first quarter this year,” a Forbes report noted. “It was indeed breaking news in that it was the first-ever contraction since China started reporting quarterly GDP data in 1992. However, beyond the headlines, there is surprisingly little that is newsworthy. It is not telling us anything we didn’t know already.”
“A deep contraction was widely expected because of the massive quarantine and lockdown implemented to contain the COVID-19 outbreak, which practically shut down the economy,” the report added. “For example, Wuhan, the epicenter of the outbreak, ended its lockdown only on April 18 after 76 days. Not surprisingly markets largely shrugged off the news. The S&P 500 rose 1.6% on April 17, after Nasdaq flipped into positive territory for the year the day before. Wall Street was not alone, Asian and European stocks also finished the week higher.”
If the Chinese government can come through with positive changes, these funds could benefit:
- Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR): 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 Harvest CSI 500 China-A Shares Small Cap ETF (ASHS): 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 (ASHX): 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.
For more market trends, visit ETF Trends.