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MCHI: Does Opportunity Beckon In China?

Dec. 03, 2018 4:51 PM ETiShares MSCI China ETF (MCHI)IVV8 Comments


  • I previously wrote an article sharing 5 ETFs For A Possible Bounce In Emerging Markets. One of those ETFs was MCHI.
  • Given recent conditions, I decided to do a deeper dive into this ETF.
  • For investors willing to take on some risk, taking a gamble on China may offer potential for market-beating gains.

Back in September, I wrote an article entitled 5 ETFs For A Possible Bounce In Emerging Markets. While 4 of the 5 ETFs covered the entire emerging market spectrum, I concluded by briefly featuring an ETF specifically dedicated to China, the iShares MSCI China ETF (NASDAQ:MCHI).

Recent events caused me to decide to take a yet closer look at both the prospects for the China market in 2019, as well as MCHI. Before I go any further, let me be clear that this is somewhat of a departure from my normal themes of low expenses and diversification. This ETF is not for the faint of heart, as there is much that is uncertain about the near-term prospects for China. At the same time, it may be exactly for this reason that Chinese shares are relatively cheap, in other words that opportunity beckons.

Trump & Xi - A Delicate Dance

It is no secret that the U.S. is currently embroiled in a trade war with China. Just this past week, President Trump reiterated his threat to raise tariffs on more than $200 billion of Chinese goods to 25% in January. Among other things, Apple Inc.'s (AAPL) stock dropped in response, as Trump said in the interview that could include tariffs on Apple products imported from China, including iPhones and laptops.

At the same time, things aren't exactly going perfectly here in the U.S. The U.S. stock market has thrown a fairly significant tantrum in Q4, with the NASDAQ index giving back almost all of its whopping 16.56% YTD gain as of the end of Q3 at one point, though it has recovered some of that this past week. And then there was General Motors' (GM) shocking announcement that it was cutting 14,700 jobs, including thousands in Ohio, directly in contrast with

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