China has enjoyed relatively cheap oil from Iran over recent years, but this “embargoed” source of energy now appears off the table at least for the foreseeable future – part of the bigger picture for President Trump, in our opinion. Signs are emerging that the conflict is disrupting crude flows to key buyers, with top importer China moving to conserve fuel. With fuel costs rising into an already hamstrung economy, we see no hurry to start taking on exposure to the world’s 2nd largest economy, although we are conscious that the IZZ ETF has already corrected ~20%, with the pullback likely close to maturity.
The ASX-traded IZZ ETF is not hedged and cost 0.74% pa, but it does give exposure to ~50 large-cap Chinese stocks, many hard to buy via Western indices. Interestingly, this ETF rolled over way before others in the region and we wouldn’t be surprised to see it bottom first, one we’re watching on its own merits and as a potential trigger across the region.
- We can see the IZZ ETF testing the $45-48 region in the coming weeks as oil weighs on the index.
MM is neutral towards the IZZ ETF
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