This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

3 ETFs to Gain From China's Manufacturing Growth

Stocks in this article: EWS EWT CHII

NEW YORK ( TheStreet) -- Two weeks ago, China hiked interest rates for the first time in three years. Nobody had seen it coming. Up to that moment, investors believed that the country would not upset the world's apple cart, even with its hot-running 9%- to- 10% GDP.

Yet they did indeed raise rates on Oct. 19. The People's Bank probably felt that with assets 30% higher than the summertime lows, it was time to cool the speculative appreciation of assets. (How ironic is it that China's robust growth requires rate hikes, whereas anemic U.S. growth means a second round of quantitative easing?)

The implications of Chinese monetary tightening are (and were) straight-forward. Resource-related companies and resource-rich countries might not fare as well if they ship less materials to the mainland. Not surprisingly, shares of Brazil (EWZ), South Africa (EZA) and Australia (EWA) tumbled on Oct. 19.

Two weeks later, on Oct. 11, we can see why China raised rates in the first place. The country's manufacturing growth actually accelerated in October. The recent data serves to confirm that the People's Bank has its eye on the ball.

For investors, however, the correct call is a bit more challenging; specifically, manufacturing success in China may or may not be beneficial to materials exporters over the next few months. After all, doesn't the acceleration in manufacturing increase the odds of additional China rate hikes?

It follows that I am less inclined to select China's more obvious trading partners right now. I am more inclined to select Chinese industrial firms themselves as well as non-resource-related trading partners.

Here are 3 ETFs that benefit from manufacturing growth in China, even with the uncertainty surrounding future rate hikes:

1. iShares MSCI Singapore (EWS). One look at this fund's holdings tells you most of what you need to know. The market-cap weighted index tracked by EWS has a 10% weighting in Oversea-China Banking Corporation.

OCBC Bank is the second largest bank in Southeast Asia and was one of the only foreign banks with a branch presence in China in the 1950s, fostering brand name loyalty. Singaporean companies have invested tens of billions in China's Guangdong, Shandong and Jiangsu provinces, particularly in telecommunications and electronic equipment manufacturing. Singapore Telecom is a top 10 holding.

2. iShares Taiwan (EWT). When I lived in Taiwan in the 1980s, a military take-over by China may have seemed remote, but hardly out of the realm of possibility.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,191.37 -195.84 -1.13%
S&P 500 2,002.16 -27.39 -1.35%
NASDAQ 4,637.9940 -43.5030 -0.93%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs