China and Hong Kong Fall as Exports Fall, Imports Rise in April



Trade balance shrinks

After recovering on May 7, China’s Shanghai Composite Index fell 1.12% to 2,893.76 on May 8. The market started the day on a strong note, rising to the day’s high of 2,929.43 by around 11:30 AM local time (11:30 PM EDT on May 7). Yesterday’s 1.65% fall in the S&P 500 didn’t seem to deter the bulls.

However, soon after China’s National Bureau of Statistics released its April trade data, the markets retreated, turning red. The data showed that the trade surplus for April came in at $13.8 billion, much lower than the expected $35 billion. However, China’s trade surplus with the United States actually rose by half a billion dollars.

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The unexpected 2.7% fall in the country’s exports coupled with the 4% rise in its imports caused its trade surplus to fall. With world markets on the back foot, the CBOE Volatility Index (VIX) was up 23% as of 4:20 AM EDT. VIX rises with volatility.

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Hong Kong

Hong Kong’s Hang Seng Index followed China and ended the day with a fall of 1.23%. It followed a similar trajectory to that of the Shanghai Composite Index and fell after the trade data release.

Your ETFs

In spite of Hang Seng’s rise, the iShares MSCI Hong Kong ETF (EWH) fell 1.29% on May 7. With the Hang Seng Index back in the red, EWH is expected to remain under pressure.

The iShares MSCI China ETF (MCHI) fell 3.05% on May 7 in spite of the Chinese market turning green. Although we expect it to remain under pressure, it could outperform other China-focused ETFs today.

The iShares China Large-Cap ETF (FXI) fell 2.7% on May 7. The ETF was marginally up in premarket trading on May 8 in spite of the trade data. The bad news may have been factored into its price.


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