3 Views: Buy Or Bail On China ETFs?

September 04, 2015

Susanne Alexandor, VP, client portfolio manager at Toronto-based Cougar Global Investments:

We believe the risks of China suffering a hard landing are low, but the uncertainty regarding how China is transitioning its economy has increased.

There is a risk of policy mistakes that could lead to an even weaker yuan, which would negatively impact other Asian countries including Japan, and even Europe.

The impact of a slower-growing China should have a minimal impact on the U.S. We therefore sold the iShares MSCI All Country Asia ex Japan ETF (AAXJ | B-93); reduced currency-hedged Japan, with the iShares Currency Hedged MSCI Japan (HEWJ | D-38); and sold Europe, with the iShares MSCI EMU (EZU | A-82).

We reallocated back to the U.S., which has been our largest holding across our mandates. We remain positive on the outlook for the U.S. economy, and chose to increase our exposure to the sector of the stock market most domestically oriented.

Robbie Cannon, CEO at Horizon Investments of Charlotte, North Carolina:

China is similar to the oil market in that neither is fully market driven. The oil market is a cartel with a pricing mechanism. China's market is a command economy, and is driven by its political party, a party that can enter, exit and change market dynamics as it sees fit.

It is learning how to communicate in a fast-paced global world where policy decisions have real market consequences.

They are emerging, and continue to be interesting in doses, but should not be a significant portion of anyone's portfolio.

In fact, Chinese investors currently on the whole are underweight Chinese equities as it relates to their overall wealth. What do they know that we don't?


Contact Cinthia Murphy at [email protected].

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