Cinthia Murphy, Managing Editor, ETF.com
China equity funds have been the best-performing emerging market ETFs in 2019, tallying gains of up to 37% year-to-date largely on hopes of a trade deal with the U.S.
China has led BRIC nations in returns this year, and has helped buoy broader emerging market ETFs such as the iShares Core MSCI Emerging Markets ETF(IEMG) and the Vanguard FTSE Emerging Markets ETF (VWO)—each of these funds allocating 50-58% of their portfolios to BRICs. IEMG and VWO are up 14% year-to-date.
Best-Performing China Equity ETFs In 2019 (excluding leveraged/inverse (ETFs)
YTD Return (%)
Global X MSCI China Consumer Staples ETF
Global X MSCI China Information Technology ETF
CSOP FTSE China A50 ETF
KraneShares CICC China Leaders 100 Index ETF
Invesco Golden Dragon China ETF
Global X MSCI China Consumer Discretionary ETF
WisdomTree China ex-State-Owned Enterprises Fund
Xtrackers Harvest CSI 300 China A-Shares ETF
VanEck Vectors ChinaAMC CSI 300 ETF
Xtrackers MSCI China A Inclusion Equity ETF
SPDR MSCI China A Shares IMI ETF
VanEck Vectors ChinaAMC SME-ChiNext ETF
KraneShares Bosera MSCI China A Share ETF
iShares MSCI China A ETF
KraneShares CSI China Internet ETF
Invesco China Technology ETF
Global X MSCI China Health Care ETF
Reality Shares Nasdaq NexGen Economy China ETF
Deal Or No Deal?
A lot of the upward momentum in China ETFs has centered on the U.S.-China trade deal, once expected to be completed by the end of this week. That deal is now in question.
The U.S. administration this weekend threatened further tariffs over Chinese goods, expressing frustration at the pace of negotiations. In return, the Chinese delegation threatened to be a no-show at the negotiating table later this week. Global markets were roiled Monday, with all eyes on U.S. and China equities.
What happens next is anyone’s guess. It could be that China ETFs, and broader emerging market funds, see consolidation as this trade spat unfolds, especially after strong gains this year.
Some argue that if a deal is struck, China ETFs could see a lot more upside, however. Not only would the trade deal be beneficial, but Chinese economic growth is picking up, projected now to hit close to 7% GDP expansion in 2019, thanks in part to government stimulus fueling consumer sectors, and structural reforms that could lead to solid earnings growth.
BRICs Doing Well
Other pockets of the emerging market universe also doing well include Russia ETFs. Russia has been the second-best-performing emerging market this year. It too was on shaky ground Monday as global markets reacted to the U.S.-China trade dispute, but the VanEck Vectors Russia ETF (RSX) and the iShares MSCI Russia ETF (ERUS) have delivered double-digit gains in 2019. Fueling the funds is strong crude oil prices as well as solid corporate earnings despite unimpressive GDP growth.
Other BRICs—India and Brazil—haven’t rallied as much, but are also serving up interesting storylines for investors this year. One is in the middle of a five-week-long election process that many expect will reelect Prime Minister Modi; the other under a newly minted pro-business administration—the first in 12 or so years—that could implement much needed reforms. Funds like the iShares India 50 ETF (INDY), the iShares MSCI India ETF (INDA) and the WisdomTree India Earnings Fund (EPI), as well as the iShares Brazil Capped ETF (EWZ), could remain in focus in weeks ahead.
Chart courtesy of Stockcharts.com
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