Markets

ETF Winners as US-China Stay Committed to Phase 1 Trade Deal

The latest progress in U.S.-China trade talks has brought optimism in markets. Ending speculations and concerns over simmering tensions between the two large economies, trade officials have reaffirmed their commitment to the Phase 1 trade deal. Notably, the pledge was made between US Trade Representative Robert Lighthizer, US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He on a phone call, which was previously expected on Aug 15.

In this regard, US Trade Representative's office (USTR) said that, "both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement," per a Reuters article. It also mentioned that “the parties also discussed the significant increases in purchases of US products by China as well as future actions needed to implement the agreement." Discussions were also done on China’s actions to enhance the protection of U.S. intellectual property, regulate the forced transfer of American technology to China firms and make its financial services market accessible to U.S. firms, according to a Reuters article.

ETF Winners to Watch

US Agricultural/Livestock ETFs

The U.S. agricultural sector has seen the worst due to the Sino-US trade war. According to the US Census Bureau, $7.27 billion worth of agricultural goods have been exported to China in the first half of 2020, per a Reuters article. Although China has increased its purchases of agricultural goods, including soybeans, it is significantly lagging its commitment to buy $36.5 billion worth of U.S. agricultural goods under the Phase 1 of trade deal, according to a Reuters article.

The latest developments might be a breather for the sector. Thus, investors can keep an eye on ETFs like Invesco DB Agriculture ETF DBA and Teucrium Wheat ETF WEAT (read: Tap These ETFs to Play the Strong Momentum in Grains).

Semiconductor ETFs

Let’s take a look at some semiconductor ETFs that can gain traction from the receding trade tensions. iShares PHLX Semiconductor ETF SOXX and VanEck Vectors Semiconductor ETF (SMH) can be given a thought in this respect. Investors can also consider leveraged ETFs like Direxion Daily Semiconductors Bull 3x Shares (SOXL) and ProShares Ultra Semiconductors (USD) (read: Semiconductor ETFs Shining Bright Amid Coronavirus Crisis).

Energy ETFs

China has committed to purchase more U.S. energy products like liquified natural gas, petroleum oil, methanol and coal. Going by a Reuters article, in the first half of the year, China has effectively bought 5% of the promised $25.3 billion of energy products from the United States. Notably, reservations have been made for tankers to carry at least 20 million barrels of U.S. crude in August and September by China state-owned oil firms, according to a Reuters article.

Against this backdrop, investors can consider Energy Select Sector SPDR Fund XLE, Vanguard Energy ETF VDE, SPDR S&P Oil & Gas Exploration & Production ETF XOP and iShares U.S. Energy ETF (IYE) (read: Energy ETFs Down on Weak Exxon, Chevron Earnings).

Industrial ETFs

China has also committed purchases for the industrial sector that include steam turbines, nuclear reactors, refrigerators, insulated wire, antibiotics as well as iron and steel products. With both the countries commitment to the trade deal, investors can keep a tab on the following ETFs: Industrial Select Sector SPDR Fund XLI, Vanguard Industrials ETF VIS, iShares U.S. Industrials ETF (IYJ) and Materials Select Sector SPDR Fund (XLB) (read: ETFs to Gain as U.S. Business Activity Touches 18-Month High).

China ETFs

The deal presumably marks some cordial ties between China and the United States. In such a scenario, 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).

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Vanguard Industrials ETF (VIS): ETF Research Reports

Energy Select Sector SPDR ETF (XLE): ETF Research Reports

Industrial Select Sector SPDR ETF (XLI): ETF Research Reports

iShares MSCI China ETF (MCHI): ETF Research Reports

iShares China LargeCap ETF (FXI): ETF Research Reports

iShares PHLX Semiconductor ETF (SOXX): ETF Research Reports

Vanguard Energy ETF (VDE): ETF Research Reports

Teucrium Wheat ETF (WEAT): ETF Research Reports

Invesco DB Agriculture ETF (DBA): ETF Research Reports

SPDR SP Oil Gas Exploration Production ETF (XOP): 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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