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Trade War Moves to Rare Earths, Chinese Indexes Gained


May. 29 2019, Published 8:33 a.m. ET

Tip of the iceberg

Having a state-run media helps countries like China make veiled threats and test the waters.

On May 29, China’s People’s Daily, a state-run newspaper, published a commentary talking about the possibility that the US could lose access to rare earth materials due to the trade war with China.

Rare earths are used in mobile phones, X-ray machinery, and nuclear reactors. A supply disruption for these rare earths means that the US could be at a technological disadvantage. According to the US Geological Survey, China is the biggest producer of rare earths and contains 37% of rare earth reserves.

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Chinese indexes

Despite increasing belligerence from the US and China, the Shanghai Composite Index gained 0.16% on May 29. The index rose until mid-afternoon but pared some gains in the late trade.

However, the Shenzhen component fell on May 29. The index opened deep in the red as the news broke about the possibility of China’s use of rare earths in the trade war. However, the index recovered marginally during the day and closed 0.28% lower than the previous day’s close.

Your ETFs

China-focused ETFs had a good day on May 28. Two days of gains in Chinese stocks led these ETFs higher. The iShares MSCI China ETF (MCHI) gained 0.78% on May 28, while the iShares China Large-cap ETF (FXI) rose 0.5%. The KraneShares CSI China Internet ETF (KWEB) gained 0.77%. The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) was the biggest gain among these ETFs with 1.52% gains.


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