Markets

China ETFs in Focus as Investment Growth Hits 20-Year Low

China recently disappointed investors with third-quarter GDP  growth of 6% year over year, marking the slowest pace since first-quarter 1992. The latest data on China’s industrial economy highlights the broad-based slowdown in the country’s manufacturing sector. Moreover, data released by China’s National Bureau of Statistics (NBS) on fixed asset investment, purchases of capital goods, real estate and infrastructure growth hinted at the lowest growth rate since November 1999 when the system of maintaining official records had started. Weak global economic growth and greater uncertainties in the external environment are considered major reasons behind this slowdown. Notably, companies are limiting investments given the insecurity emanating from the trade tensions (read: ETFs in Focus as China's GDP Nears 30-Year Low Level)

A Sneak Peek at the Data

China’s industrial production grew 4.7% in October compared with the 5.8% rise in September. Notably, the growth rate in September recovered from the 17-year low of 4.4% in August. The metric, which measures growth in sectors like manufacturing, mining and utilities, also lagged analysts’ expectations of 5.4% growth. Moreover, within industrial production, manufacturing rose 4.6% in comparison to the 5.6% improvement noticed in September. Meanwhile, mining saw a 3.9% increase, comparing unfavorably with 8.1% growth in September.

Moreover, the world’s second largest economy’s fixed asset investment, purchases of capital goods, real estate and infrastructure grew 5.2% in the first 10 months of 2019, missing analysts’ expectations of 5.4% increase. The metric also compares unfavorably with 5.4% growth in September.

An important metric of consumption, retail sales saw the lowest monthly growth rate since April 2019. The metric rose 7.2% year over year in October, falling short of analysts’ in-line estimates, predicting no change from 7.8% growth in September, per a Bloomberg poll.

Moreover, infrastructure investment rose 4.2% year to date compared with September’s 4.5% increase. Meanwhile, investment in manufacturing increased to 2.6%, up from September’s 2.5%.

Looking Forward

On support from improved export levels to the emerging markets and the European Union, China witnessed better-than-expected export and import levels for October (read: Impressive Exports Data Put China ETFs in Focus)

Meanwhile, China’s central bank is taking measures to boost credit. Recently, the People’s Bank of China slashed the interest rate on its one-year medium-term lending facility loans for the first time since early 2016. It also offered 200-billion yuan ($29 billion) of one-year loans to banks in order to add liquidity to the banking system. Also, per the latest updates, the United States and Beijing are close to striking a trade deal. In fact, China recently removed its 4-year-old ban on U.S. poultry shipments. However, Beijing is not expected to benefit on an immediate basis from a ‘phase 1’ trade deal with the United States (read: Phase 1 Trade Deal or Not: ETFs to Ride the Trend).

ETFs in Focus

Against this backdrop, investors can keep a tab on a few China ETFs like iShares China Large-Cap ETF FXIiShares MSCI China ETF MCHIXtrackers Harvest CSI 300 China A-Shares ETF ASHR and Invesco Golden Dragon China ETF PGJ.

FXI

This fund seeks long-term growth by tracking the investment returns, before fees and expenses, of the FTSE China 50 Index. It comprises 50 holdings. The fund’s AUM is $4.37 billion and expense ratio is 0.74% (read: ETFs in Focus as China's Economic Slowdown Persists).

MCHI

This fund tracks the MSCI China Index. It comprises 461 holdings. The fund’s AUM is $4.03 billion and expense ratio is 0.59% (read: ETF Winners as Sino-US Trade War Tensions Ebb).

ASHR

This fund tracks the CSI 300 Index. It comprises 301 holdings. The fund’s AUM is $1.72 billion and expense ratio is 0.65%.

PGJ

This fund follows the NASDAQ Golden Dragon China Index, which offers exposure to the U.S. exchange-listed companies that are headquartered or incorporated in the People’s Republic of China. It holds a basket of 66 stocks. The product has AUM of $185.1million and charges 70 bps in annual fees.

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Invesco Golden Dragon China ETF (PGJ): ETF Research Reports

Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR): ETF Research Reports

iShares China Large-Cap ETF (FXI): ETF Research Reports

iShares MSCI China ETF (MCHI): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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