China ETFs Surge on Restart in Trade Talks

 

Amongst the best non-leveraged ETFs of Monday, the VanEck Vectors ChinaAMC SME-ChiNext ETF (NYSEArca: CNXT) increased 4.1% and the Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF (NYSEArca: ASHS) advanced 3.5%. In the meantime, the more widely observed Xtrackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR) rose 3.0%.

 

The rallying on Monday came after Trump and Xi met up at the Group of 20 summit in Japan where both sides consented to hold off on further tariffs, CNBC reports.

 

Yet, market experts cautioned that this doesn't suggest a signed deal will be in place any time soon.

 

“Although a worst case outcome has been averted, the threat of tariffs continues and it is unexpected the truce gives much confidence to firms’ investment and hiring decisions,” Tapas Strickland, an economist at National Australia Bank, said in a note. “It is most likely that soft manufacturing conditions will persist until if and when a fuller agreement is fleshed out.”

 

Citi analysts in addition said that “We expect the current truce to last through the end of the year, with 2020 potentially being a ‘Deal-maker’ year.”

 

The two sides also agreed to make concessions to ponder their intent to move forward with trade talks. For example, Trump indicated he could change his decision to ban American companies from selling products to telecom giant Huawei.

 

Beyond the short-term trade volatility, investors were closely considering Chinese shares, notably China A-Shares, ahead of major index changes from MSCI. Eugene Qian, president of UBS Securities, pointed out that foreign investors have for the last 12 to 18 months been looking to buy into China A-Shares and estimated billion “should come into A shares by the end of the year,” in accordance with a separate CNBC report.

 

Index providers like MSCI and FTSE Russell are beginning to add China A-Shares exposure to their major global benchmarks, including the closely watched MSCI Emerging Market Index and FTSE Emerging Index.

 

Soutce: Tronserve