Celebrate Chinese New Year With These ETFs

The year of the Rooster was positive of China stocks and ETFs. In the last one year (as of Feb 9, 2018), the largest China ETF iShares China Large-Cap ETF (FXI –Free Report) gained about 24.9% with most gains coming from 2017. So far this year, the market is in the red mainly due to an acute global selloff at the start of February on global rising rate concerns.

This makes it important to judge how Chinese equities and ETFs will perform in the New Year – the year of the dog.

Economic Growth Improving

China’s economy grew at a faster clip than expected in the fourth quarter of 2017, thanks to an export recovery. It was the first annual acceleration in growth in seven years, confronting concerns that “curbs on industry and credit would hurt expansion.” China’s exports grew at the quickest clip in four years, last year.

GDP growth was 6.8% in the October to December period from a year earlier, which was better than 6.7% growth forecast by analysts in a Reuters poll and unchanged from the last quarter.

Economy & Markets in Transformation    

The country’s 19th National Congress of the Communist Party meeting indicated “coordinated policies to reduce financial risks, more institutionalized environment policies, and accelerated state-owned enterprise (SOE) reforms,” as viewed by HSBC’s Greater China Economist Julia Wang (read: Follow These ETFs as China’s 19th National Congress Begins).

Chinese President Xi Jinping also indicated that “China will relax market access for foreign investment and expand access to its services sector, as well as deepen market-oriented reform of its exchange rate and financial system, while at the same time strengthening state firms.” The country is looking to curbs on industry and credit would in older industries without inhibiting growth.

Also, China “opened up the domestic bond market and the fund management sector to foreign companies.” MSCI (MSCI) announced last June that it would add China A shares in the MSCI Emerging Markets Index and the MSCI ACWI Index, beginning June 2018.