US-China Talks Set In Washington: ETFs In Focus

After several rounds of discussion, the United States and China are set to start fresh talks in Washington today with follow-up sessions planned for Thursday.

In last week’s meetings in Beijing, President Donald Trump said discussions were going "extremely well" and suggested he might extend the Mar 1 truce deadline. The move would stop an immediate increase in tariffs to 25% from 10% on $200 billion worth of Chinese imports that was imposed to address U.S. demands that China curb forced technology transfers and better enforce intellectual property rights (read: Sector ETFs & Stocks to Rally on US-Sino Trade Hopes).

The fresh talks are aimed at "achieving needed structural changes in China that affect trade between the United States and China. The two sides will also discuss China's pledge to purchase a substantial amount of goods and services from the United States," per the White House. Since the December 90-day truce, China has resumed purchases of some U.S. soybeans and suspended massive buying of American commodities to get U.S. trade negotiators closer to a deal.

Per CNBC, the nearly year-long U.S.-China trade dispute seems to be ending as signals are pointing to a done deal. Based on those signs, China will continue to run large trade surpluses with the United States, and it will never accept Washington-imposed reforms of its trade and industry.

All these development are instilling confidence in stocks, especially the ones that are set to benefit the most from the move. We have highlighted five ETFs that seem to be market movers in the weeks ahead:

VanEck Vectors Semiconductor ETF SMH

Though the broader technology space is highly exposed to China, semiconductor stocks led the way with Qorvo (NASDAQ:QRVO) , Qualcomm (NASDAQ:QCOM) , NVIDIA (NASDAQ:NVDA) , Micron Technology (NASDAQ:MU) and Broadcom (NASDAQ:AVGO) having more than half of their revenues coming from China. As such, semiconductor ETFs like SMH are set to gain from the positive developments in the trade spat. This fund provides exposure to 25 securities by tracking the MVIS US Listed Semiconductor 25 Index. It has higher concentration on the top firm at 12.4% of assets while others hold less than 9% share. The product has managed assets worth $997.1 million and charges 35 bps in annual fees and expenses. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: ETFs to Buy as NVIDIA Jumps on Solid Revenue Outlook).

VanEck Vectors Agribusiness ETF MOO

Agricultural sector is also expected to breathe sigh a relief as new tariffs or higher duties on crops like soybeans and corn has been a concern. This fund is by far the most popular choice in the space with AUM of about $768.3 million. It tracks the MVIS Global Agribusiness Index, which offers exposure to companies involved in agri-chemicals, animal health and fertilizers, seeds and traits, from farm/irrigation equipment and farm machinery, aquaculture and fishing, livestock, cultivation and plantations, and trading of agricultural products. The fund holds 57 securities in its basket and charges 57 bps in annual fees.

iShares U.S. Aerospace & Defense ETF (HM:ITA)

Aerospace & defense stocks are soaring on hopes of a deal as these have wide exposure to international markets. ITA offers exposure to U.S. companies that manufacture commercial and military aircraft and other defense equipment by tracking the Dow Jones U.S. Select Aerospace & Defense Index. Holding 35 stocks, the fund is highly concentrated on the top firm at 12.5% while other firms hold no more than 8% share each. The fund has AUM of nearly $5.4 billion and charges 43 bps in fees a year. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Why Aerospace & Defense ETFs are Soaring in 2019).

United States Copper Index Fund CPER

As China is the top consumer of raw materials, hopes of a trade deal drove copper higher. This fund seeks to track the performance of the SummerHaven Copper Index Total Return, plus interest income from CPER’s holdings. The index provides investors exposure to front-month copper futures contract traded on the NYSE Arca. The product has accumulated $10.5 million in its asset base and charges 80 bps in annual fees. It has a Zacks ETF Rank #3 with a High risk outlook.

Teucrium Soybean Fund SOYB

Since soybean has been the target commodity in the U.S.-China trade war, signs of positive developments in the trade deal lifted SOYB higher. The product uses three futures contracts for soybeans, all of which are traded on the CBOT Futures Exchange. The three contracts include the second-to-expire contract weighted 35%, the third-to-expire contract weighted 30% and 35% weighted contract expiring in the December following the expiration month of the third-to-expire contract. The fund has amassed $25.1 million in its asset base and charges a higher fee of 1.74% per year. It currently has a Zacks ETF Rank #4 (Sell) with a High risk outlook (read: What's Behind the Rise in Soybean ETF?).

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