When it comes to sector ETFs, many investors solely focus on domestic offerings, but there are other ways to tap sector-level opportunities, including China ETFs.
Last December, Global X added five China sector ETFs, bringing its roster of sector ETFs devoted to the world’s second-largest economy to 11. The result is a full offering that corresponds with each of the eleven major economic sectors identified by the Global Industry Classification Standard (GICS®). The suite will offer investors the first way to comprehensively access and evaluate the country’s sectors in the liquid and transparent US ETF structure.
The newest China sector ETFs from Global X are the following funds:
- The Global X MSCI China Consumer Staples ETF CHIS (CHIS)
- The Global X MSCI China Health Care ETF CHIH (CHIH)
- The Global X MSCI China Information Technology ETF CHIK (CHIK)
- The Global X MSCI China Real Estate ETF CHIR (CHIR)
- The Global X MSCI China Utilities ETF CHIU (CHIU)
Investors considering China sector ETFs should note that there is likely to be dispersion among the various sectors, as is the case with domestic sector ETFs.
This year “the difference in returns between the best and worst performing sector ETFs in China is 19.10% just two months into the year. For context, the difference between the best and worst performing sectors in the US so far this year is only 10.30%.2 The ETF tracking China’s Information Technology sector has led with returns 26.80%, while Utilities have lagged at 7.70%,” according to Global X research.
The rest of the Global X China ETF suite includes:
- The Global X MSCI China Communication Services ETF CHIC (CHIC)
- The Global X MSCI China Consumer Discretionary ETF CHIQ (CHIQ )
- The Global X MSCI China Energy ETF CHIE (CHIE )
- The Global X MSCI China Financials ETF CHIX (CHIX )
- The Global X MSCI China Industrials ETF CHII (CHII )
- The Global X MSCI China Materials ETF CHIM (CHIM )
Trade Tensions Between US and China
US/China trade tensions have been on investors’ minds for some time and that scenario has, predictably, affected broad China ETFs. Among sector ETFs, the impact varies.
“US-China trade tensions may affect broad performance across China, but individual sectors are affected differently,” said Global X. “In addition, macro-economic events and domestic stimulus can further drive a wedge between China sector performance. As China becomes an increasingly important economy for global markets, we believe arming investors with efficient tools to access each specific sector in China should allow for more nuanced and targeted approaches to invest in the world’s second largest economy.”
However, some China sector ETFs have been affected by trade talks in the short-term.
“While US-China trade negotiations have been the most prominent driver, both sectors have also benefited from campaigns by China and the EU to prevent further tariffs, improved relations with Japan, and concrete efforts to fortify supply chains and trade spanning Africa, Asia, Latin America, and the Middle East,” according to Global X.
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