Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

After Falling 11% This Month, Is The MSCI China Index A Buy?

By ETF Daily NewsETFsMay 16, 2019 02:01AM ET
www.investing.com/analysis/after-falling-11-this-month-is-the-msci-china-index-a-buy-200421931
After Falling 11% This Month, Is The MSCI China Index A Buy?
By ETF Daily News   |  May 16, 2019 02:01AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

With the MSCI China Index lower by 9.56 percent this month and residing 18.5 percent below its 52-week high, some aggressive traders and investors may be thinking Chinese equities are starting to look like value propositions.

Some analysts in the exchange traded funds space don’t disagree with at least one ETF analyst seeing value in some tactical, niche China funds that often go overlooked.

What Happened

“Traders are right to worry about the fallout from a trade war between the U.S. and China,” said analyst Michael Krause of the ETF Research Center in a Tuesday note. The damage to corporate profits–whether severe or barely noticeable–is unknowable. This uncertainty is being reflected in stock prices. It’s also likely there are bargains among the wreckage, and investors might be able to pick up solid companies at a discount.

The Global X MSCI China Industrials ETF (NYSE:CHII), which is down more than 11 percent this month, is one of the China ETFs that could be a credible value idea.

“The potential upside here comes from valuations, which appear to be pricing in a severe downturn,” said Krause. “Specifically, these stocks have a P/E ratio of just 7.9x forward earnings estimates, cheaper than at any other point in the past 5 years. They also trade at a roughly 10% discount to book value. Finally, dividends appear safe with a payout ratio (dividends per share divided by EPS) of just 27%.”

CHII, which has just $2 million in assets under management, but it yields 2.35 percent and China is one of the steadier dividend growth markets among emerging economies.

Why It’s Important

The Kraneshares MSCI China Environment (NYSE:KGRN), an ETF play on China’s efforts to reduce its massive pollution footprint, is in a bear market, residing 25.32 percent below its 52-week high. There could be valued to be had with this thematic fund.

“We think that the ‘green’ focus of companies in this fund may offer some respite from trade wars since much of their fortunes are tied to the secular growth of environmentally focused spending, including Chinese domestic infrastructure,” said Krause. “And these firms are growing much faster than Chinese companies as a whole.”

The growth trajectories of KGRN components are impressive. Five-year revenue and profit growth for KGRN members are 14 percent and 15 percent, respectively, according to ETF Research Center data.

What’s Next

Down 25 percent from its 52-week high, the First Trust China AlphaDEX (NASDAQ:FCA) 0.85%, a smart beta spin on Chinese stocks, looks terrible on the charts, but this downtrodden China ETF could also offer adventurous investors value.

FCA allocates almost 10 percent of its weight to Chinese financial services stocks, a sector that is seen as cheap in China.

“That’s no guarantee of any immunity from trade wars, but these companies do offer some stunningly cheap valuations, including a forward price-to-cash flow multiple of just 2.9x,” said Krause.

The Global X MSCI China Industrials ETF (CHII) was trading at $13.22 per share on Wednesday afternoon, up $0.04 (+0.30%). Year-to-date, CHII has declined -11.45%, versus a 7.25% rise in the benchmark S&P 500 index during the same period.

CHII currently has an ETF Daily News SMART Grade of NR (Not Rated), and is unranked among 38 ETFs in the China Equities ETFs category.

After Falling 11% This Month, Is The MSCI China Index A Buy?
 

Related Articles

BlackBull Markets
Yellow Card For Sports ETF By BlackBull Markets - Sep 01, 2021

Cristiano Ronaldo announced that he would be leaving Juventus Football Club (MI:JUVE) and returning to play for the club where he started his professional career, Manchester United...

Damian Rodgers
A Gold ETF That Pays You Monthly By Damian Rodgers - Jul 29, 2021

There is a problem with gold ETFs like GLD (NYSE:GLD), iShares Gold Trust (NYSE:IAU), and GraniteShares Gold Trust (NYSE:BAR). They don’t pay any yield at all to investors. Gold...

After Falling 11% This Month, Is The MSCI China Index A Buy?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email