The 2019 coronavirus outbreak, which has been labelled as COVID-19, has driven major intervention by the Chinese government. Total deaths from the virus have climbed above 1,700, and total cases have reached above 70,000.
The Chinese government has also taken steps to prop up the economy as the outbreak has threatened to paralyze commerce on the mainland.
China’s central bank cut a key medium-term lending rate in order to lend relief in this time. The reduction will filter through the loan prime rate, which serves as a benchmark for the broader system.
This has caused China-linked stocks to rebound, but should investors continue to steer clear?
Those who are betting on this resurgence lasting may want to look into the iShares China ETF (TSX:XCH). Even in the face of this crisis, shares have only dropped marginally in 2020. The ETF has dropped 4.2% over the past month. So, should investors look to buy the dip?
Some of the largest holdings in the ETF include Tencent Holdings, China Construction Bank Corp., China Mobile, and Bank of China. It goes without saying that any significant economic turbulence would likely hit banks hard.
China is still in the throes of battling COVID-19, and until there are more promising signs of cases and deaths subsisting investors should be concerned. This ETF does not offer enough value after this month-over-month drop to consider buying right now. It is worth monitoring for more attractive entry points going forward.
