Infrastructure spending by China could help push the industrial sector higher, giving exchange traded funds (ETFs) like the Global X MSCI China Industrials ETF (CHII) a boost.
The second-largest economy is looking to tap into a credit line to help fund the proposed infrastructure projects. It would give China a much-needed shot in the arm after global inflation and a resurgence of COVID-19 cases have been hampering growth in 2022.
“Beijing ordered state-owned policy banks to set up an 800 billion yuan (US$119.6 billion) line of credit for infrastructure projects as it leans on construction to stimulate an economy battered by coronavirus lockdowns,” the South China Morning Post reported.
“The economists maintained their estimate for infrastructure investment growth to rise to around 10 per cent this year, and said coronavirus-related uncertainty still pose risks to the economy,” the report said further.
Industrial Exposure for Long-Term Growth
CHII could give investors growth-oriented exposure for the long term as well as a way to play a rebound in the short term. The fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI China Industrials 10/50 Index, which seeks to invest in large- and mid-capitalization segments of the MSCI China Index that are classified in the industrials sector as per the Global Industry Classification System (GICS).
CHII provides investors with:
- Targeted exposure: CHII is a targeted play on the industrials sector in China — the world’s second-largest economy by GDP.
- ETF efficiency: In a single trade, CHII delivers access to dozens of industrials companies within the MSCI China Index, providing investors with an efficient vehicle to express a sector view on China.
- All share exposure: The 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 — this gives investors more diversification.
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