U.S.-China Trade Talk Snafu Opens Up Opportunity for China ETFs

U.S. President Donald Trump’s tweeting paved the way for investors to purchase China-focused exchange-traded funds at a discount. As these ETFs continue to get roiled on the latest trade talk news, it gives investors the opportunity to buy in at a cheap price.

“What Trump did this weekend was give investors an opportunity – it opened up the door,” said ETF Trends CEO Tom Lydon during an appearance on Varney & Co on Fox Business Network on Monday. “Chinese stocks are down 7% (overnight).

However, where does an investor start when they want to get a piece of the world’s second largest economy? One way is through exchange-traded funds (ETFs), but that begs another question: which one?

While companies can gain access to the largest companies in China via the iShares China Large-Cap ETF (NYSEArca: FXI), there is one caveat–the majority of the holdings in the guts of the ETF consist of state-owned enterprises where the government prevents full autonomy of these companies.

Ongoing trade negotiations between the U.S. and China, which have revolved around a wide range of issues, such as forced technology transfer as both are working feverishly to bring the trade war to an end. U.S. President Donald Trump has already imposed tariffs to the tune of $250 billion of Chinese imports in 2018.

In particular, the tariffs were meant to force China’s hand in changing its business practices, particularly when it comes to issues, such as intellectual property–all as a means to get China to open up its economy to more foreign investors.

As such, one ETF to consider is the Xtrackers Harvest CSI 300 China A ETF (NYSEArca: ASHR) as a way for investors to gain exposure to China’s biggest, best and most authentic equities. The fund is up 32 percent thus far YTD.

ASHR seeks investment results that track the CSI 300 Index that is designed to reflect the price fluctuation and performance of the China A-Share market. In essence, it’s composed of the 300 largest and most liquid stocks in the China A-Share market, including small-cap, mid-cap, and large-cap stocks.

Without a majority of its holdings in state-owned enterprises compared to FXI, ASHR provides a more authentic and diversified representation of gaining access to the world’s second largest economy.

“If you want to get right into mainland China, the ticker is ASHR, which is the CSI 300 stocks traded on mainland China, which were down 7% this morning, but they’ve come back a little bit,” added Lydon. “They are up over 40% so far this year. A lot of people looked at this whole thing and have been saying ‘boy it’s happening too fast, I may have missed it’ – here’s the opportunity to get in.”

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