Chinese Indexes Cautious, Investors Await Fed Meeting, G20 Summit

We’re now in the second half of June. With the Fed meeting scheduled for this week and the G20 summit scheduled for next weekend, global markets seem cautious. While no rate cut is expected in this week’s Fed meeting, Fed chair Jerome Powell’s dovish comments earlier this month have been helping the markets. An unexpected rate cut will surely make President Donald Trump and the markets happy.

Perhaps the bigger event is the G20 summit scheduled for next week. While the window to reach a deal to end the US-China trade war is quickly closing, any sign of peace between the trade-warring nations may make the markets less stressed. China hasn’t yet confirmed a meeting between President Xi Jinping and President Trump, but President Trump says it doesn’t matter, as there will be a deal sometime in the future anyway.

China’s Shanghai Component Index and Shenzhen Composite Index diverged today. While the Shanghai Component Index gained 0.2%, it later lost 0.33%. Last week, the Shanghai Composite and Shenzhen Component Indexes posted 1.92% and 2.62% weekly gains, respectively.

The iShares MSCI China ETF (MCHI) lost 1.17% on June 14 but gained 0.3% on a weekly basis. The ETF has gained 1.2% so far in June. The iShares MSCI China A ETF (FXI) lost 0.95% on June 14 to end the week flat. Alibaba (BABA), which accounts for 13% of MCHI’s holdings, lost 1.39% on the NYSE on June 14. The rise in China’s retail sales failed to boost Alibaba, as the rest of the country’s economic data disappointed. Alibaba derives the majority of its revenue from China.