Will Chinese ETFs Suffer from Weak Economic Data?


The world’s second-largest economy experienced disappointing growth in the third quarter, largely due to power shortages and a slowdown in the real estate sector. According to the National Bureau of Statistics, China’s third-quarter GDP grew 4.9% year-on-year, slowing from 7.9% in the second quarter of 2021 and below market consensus of 5.2% (according to a Reuters poll). The measure also looks hugely disappointing compared to the record 18.3% expansion in the first quarter of 2021.

China’s industrial production rose 3.1% in September, lagging analysts’ estimate of 4.5% according to a Reuters poll. In this regard, Fu Linghui, spokesperson for the National Bureau of Statistics, said that “since the start of the third quarter, the risks and challenges at home and abroad have increased,” according to a CNBC report. Factories in China have faced power shortages as they had to shut down production in late September, according to a Reuters report. Rising coal prices and the power shortage prompted local authorities to cut off the power supply.

Market experts also attribute the slowing economic recovery in China to President Xi Jinping’s efforts to implement structural changes to manage long-term risks and distortions (as reported in a Reuters article). These changes involve reducing carbon emission levels and cracking down on the real estate sector and major technological players.

Current economic conditions in China do not look very favorable as analysts lower their growth forecasts. Barclays analysts cut their fourth-quarter estimate from 1.2% to 3.5% on strained data (according to a Reuters report). Continuing, ANZ analysts lowered their expectations for China’s GDP growth in 2021 to 8.0% from 8.3%.

Meanwhile, all hopes now rest on policymakers who will need to balance the impact of slowing these structural changes with supportive measures that will protect the economy and manage the risks of contagion from a debt crisis within the country. China Evergrande group, according to a Reuters article. In this regard, Louis Kuijs, Head of Asian Economics at Oxford Economics, said that “in response to the dismal growth figures we expect in the coming months, we believe policymakers will take more action to support growth, including ensuring abundant liquidity in the interbank market, accelerating infrastructure development and relaxing aspects of overall credit and real estate policies. ”This was mentioned in a Reuters article.

Chinese ETFs that could suffer

In this context, investors can keep an eye on a few Chinese ETFs like IShares MSCI China ETF MCHI, IShares China Large-Cap ETF FXI, Xtrackers Harvest CSI 300 China A-Shares ETF ASHR, ETF SPDR S&P China GXC, IShares MSCI China A ETF CNYA and Invesco Golden Dragon China ETF PGJ.

MCHI

This fund replicates the MSCI China index. It includes 612 farms. The fund’s assets under management are $ 6.37 billion and the expense ratio is 0.59% (read: Will Chinese ETFs feel the heat of weak economic data?).

FXI

This fund seeks long-term growth by replicating the investment returns, before fees and expenses, of the FTSE China 50 index. It is made up of 50 holdings. The fund’s managed assets are $ 5.14 billion and the expense ratio is 0.74% (read: Top ETF Stories of September).

ASHR

This fund follows the CSI 300 index. It includes 304 holdings. The fund’s assets under management are $ 2.41 billion and the expense ratio is 0.65%.

GXC

The fund seeks to provide investment results which, before fees and expenses, generally match the total return performance of the S&P China BMI Index. It includes 901 farms. The fund’s assets under management are $ 1.74 billion and the expense ratio is 0.59%.

CNYA

The fund replicates the MSCI China A Inclusion Index. It includes 484 farms. The fund’s assets under management are $ 712.2 million and the expense ratio is 0.60%.

PGJ

This fund tracks the NASDAQ Golden Dragon China Index, which provides exposure to publicly traded US companies headquartered or incorporated in the People’s Republic of China. He owns a basket of 96 shares. The product has assets under management of $ 712.2 million and charges 69 basis points in annual fees.

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IShares China LargeCap ETF (FXI): ETF Research Reports

SPDR S&P China ETF (GXC): ETF Research Reports

iShares MSCI China ETF (MCHI): ETF Research Reports

Xtrackers Harvest CSI 300 China AShares ETF (ASHR): ETF Research Reports

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

IShares MSCI China A ETF (CNYA): 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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