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US-China Trade Tensions Re-Escalate: 7 Vulnerable ETF Areas

By Zacks Investment ResearchStock MarketsMay 06, 2019 08:00AM ET
www.investing.com/analysis/uschina-trade-tensions-reescalate-7-vulnerable-etf-areas-200417251
US-China Trade Tensions Re-Escalate: 7 Vulnerable ETF Areas
By Zacks Investment Research   |  May 06, 2019 08:00AM ET
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The U.S.-China trade tensions flared up all over again with the Trump saying in a Sunday afternoon Twitter post that the current 10% tariffs on $200 billion worth of Chinese goods will jump to 25% on Friday. He also said to levy 25% levies on an extra $325 billion of Chinese goods “shortly,” per CNBC. Following the latest tweet, China is reportedly mulling over canceling this week’s trade negotiations.

Investors should note that President Donald Trump announced a delay in the increase of tariffs on about $200 billion worth of Chinese goods in late February, citing “substantial progress” in trade talks with Beijing.

A group of market watchers believe that Trump’s decision to more than double the tariff rate on $200 billion of goods was intended to warn China not to start negotiations with more “empty offers”, per CNBC.

Following are the ETF areas that are in the risk amid escalating trade tensions between the United States and China.

China & Asia

Chinese markets slumped more than 5% in the morning trading session of Monday, reacting to the U.S. threat. China ETFs like China A iShares MSCI ETF CNYA, CSOP FTSE China A50 ETF (NYSE:AFT) and Asia-Pacific ETFs like iShares MSCI Taiwan ETF (EWT) andiShares MSCI Hong Kong ETF (EWH) are likely to come under pressure.

Dow Jones & Industrials

Since the trade tensions would leave a significant negative impact on the industrial and manufacturing sector, such stocks may slump. SPDR Dow Jones Industrial Average (NYSE:DIA) ETF (V:DIA) and Industrial Select Sector SPDR ETF (NYSE:XLI) XLI may thus slip.

Global Markets (Mainly Emerging Asia)

U.S.-China trade spat was a bother for almost the entire world. The IMF had also previously cautioned that a full-scale trade war could impede global growth. All-world ETF iShares MSCI ACWI ETF ACWI and iShares MSCI Emerging Markets ETF (NYSE:EEM) EEM may also be in the red in the near term.

Semiconductor

U.S. chipmakers have the largest sales exposure to China. So, renewed tariff tensions with China could bring back pain in the semiconductor space.iShares PHLX Semiconductor ETF SOXX is thus in a vulnerable position.

Auto

U.S. auto companies earn about 12% revenues from China. With Beijing slamming tariffs on U.S. auto imports, First Trust NASDAQ Global Auto Index Fund CARZ would come under pressure (read: US-Sino Trade War Escalates: Most Vulnerable Sector ETFs).

Casino

U.S. casino companies like Wynn Resorts (NASDAQ:WYNN) , Las Vegas Sands (NYSE:LVS) and MGM Resorts International (NYSE:MGM) have considerable exposure to China. The former two have respective revenue exposure of about 69% and 53% to China. Along with these stocks, casino gaming ETF VanEck Vectors Gaming ETF BJK should thus suffer.

Agriculture

Agricultural products like yellow and black soybean had faced retaliatory tariffs from China. Notably, China purchases about half of the U.S. soybean and is the second-largest buyer of American cotton. So, Teucrium Soybean ETF SOYB and the broader agriculture ETF Invesco DB Agriculture (MI:DBA) may face risks (read: US Farm Belt at Risk on China Tariffs: ETFs in Focus).

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MGM Resorts International (MGM): Free Stock Analysis Report

Wynn Resorts, Limited (WYNN): Free Stock Analysis Report

Las Vegas Sands Corp. (LVS): Free Stock Analysis Report

SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports

iShares PHLX Semiconductor ETF (SOXX): ETF Research Reports

Teucrium Soybean Fund (SOYB): ETF Research Reports

First Trust NASDAQ Global Auto Index Fund (CARZ): ETF Research Reports

iShares MSCI ACWI ETF (ACWI): ETF Research Reports

iShares MSCI Emerging Markets ETF (EEM): ETF Research Reports

iShares MSCI Taiwan ETF (EWT): ETF Research Reports

iShares MSCI Hong Kong ETF (EWH): ETF Research Reports

Invesco DB Agriculture Fund (DBA): ETF Research Reports

VanEck Vectors Gaming ETF (BJK): ETF Research Reports

Industrial Select Sector SPDR Fund (XLI): ETF Research Reports

Apollo Senior Floating Rate Fund Inc. (AFT): ETF Research Reports

Original post

Zacks Investment Research

US-China Trade Tensions Re-Escalate: 7 Vulnerable ETF Areas
 
US-China Trade Tensions Re-Escalate: 7 Vulnerable ETF Areas

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