North American markets enjoyed an uptick in early September after the United States and China announced they would restart trade talks in October. That initial optimism has given way to skepticism as a concrete breakthrough still looks remote.
China has aimed to narrow trade talks and shelve national security concerns for a later date, but this approach may be too hopeful.
The iShares MSCI China ETF (NASDAQ:MCHI) seeks to track the investment results of an index composed of Chinese equities. Although trade concerns have generated anxiety, the fund has climbed 13.2% in 2019 so far.
This comes after a 19% drop in 2018. The ETF has retreated in the turbulent years of 2015 and 2018, but in all other years since its 2012 inception it has boasted positive returns.
Some of the top holdings in the ETF include Tencent Holdings and Alibaba Group. Tencent is a Chinese multinational investing holdings conglomerate. Its subsidiaries specialize in Internet-related services and products, and it has an attractive footprint in artificial intelligence development.
Alibaba, sometimes referred to as the “Chinese Amazon,” is the second-largest holding in the fund. The company has thrived in the face of global headwinds, posting a 51% year-over-year increase in adjusted earnings per share while net sales also jumped 37% to $16.73 billion.
The U.S. and China may come to an interim agreement this year in order to shore up markets. Pressure is on ahead of the 2020 election. For this reason, I like this ETF as we look ahead to the beginning of the fall.
