Chinese stocks jump as investors bet on economic recovery: 7 ETFs to watch

Chinese stocks jump as investors bet on economic recovery: 7 ETFs to watch

Once haunted by a domestic real estate collapse reminiscent of a Lehman-style crisis, Chinese stocks saw a significant rebound in the first part of the year, reviving investors’ bets that a bigger recovery was beginning . serious and robust recovery.

Tuesday May 7, the SSE composite index, which includes all stocks listed on the Shanghai Stock Exchangereached its highest level since September 2023, showing a roughly 19% rally from 2024 lows.

The rally in Chinese stocks can be attributed to a confluence of factors. Among them is the country’s economic recovery, which has accelerated after years of turmoil following the bursting of a housing bubble.

The Chinese economy grew 5.3% in the first quarter year-on-year. This growth rate not only exceeded the 5.2% of the previous quarter, but also the 5% growth expected by analysts.

Surveys of private sector economic activity showed signs of strength in April 2024, with the Caixin services PMI marking its highest level since May 2023 and the manufacturing PMI also marking expansionary conditions.

In addition, technical factors such as the mass departure of foreign investors, which put an end to fear-driven selling, played a crucial role.

Chart: Chinese Stocks Rebound 19% From 2024 Lows – More to Come?

Are investors overestimating the Chinese market recovery? Rise in stocks compared to the reality of profits

There is a risk that investors are betting too soon on a Chinese recovery as the earnings season has so far disappointed expectations.

As a Bank of America strategist Willie Chan According to a recent report, 77% of Chinese A-shares have revised their 2024 earnings downward, with all sectors seeing sharp downward revisions.

“We believe a fundamental recovery in the economy and earnings would take time,” Chan said.

“The MSCI China Index lowered earnings growth for 2024E from 15.8% year-on-year on January 24 to 12.1% year-on-year on April 24. We fear that the market will have to further revise 2024 earnings downwards,” he added.

The expert noted that although recent macroeconomic data indicated emerging signs of improvement, the first quarter results still reflected a challenging operating environment.

A look at ETFs tracking China’s economic rebound

Several exchange-traded (non-leveraged) funds are available for U.S.-based investors to gain exposure to China’s ongoing economic rebound, each with its unique portfolio and strategy. This is how they look:

KraneShares CSI China Internet ETF (NYSE:KWEB)

• Assets under management: $6.00 billion

• Number of titles: 34

• Main titles: Tencent Holdings ADR (OTCPK:TCEHY); Alibaba Group Holding Ltd. (NYSE:BABA); PDD Holdings Inc. – ADR (NASDAQ:PDD)

• Reference: CSI China Overseas Internet Index

• Net expenses: 0.70%

• Cumulative return for the year: 9.52%

• Distance from historic peak: 220%

The story continues

iShares MSCI China ETF (NYSE:MCHI)

• Assets under management: $5.24 billion

• Number of titles: 671

• Main titles: Tencent; Ali Baba ; PDD

• Reference: MSCI China Index

• Net expenses: 0.58%

• Cumulative return for the year: 7.85%

• Distance from historic peak: 108%

iShares China Large Cap ETF (NYSE:FXI)

• Assets under management: $4.84 billion

• Number of titles: 58

• Main titles: Tencent; Meituan ADR (OTCPK: MPNGY), Alibaba

• Reference: FTSE China 50 Index

• Net expenses: 0.74%

• Cumulative return for the year: 11.53%

• Distance from historic peak: 90%

SPDR S&P China ETF (NYSE:GXC)

• Assets under management: $482.09 million

• Number of titles: 1,182

• Main titles: Tencent; Ali Baba ; PDD

• Reference: S&P China BMI Index

• Net expenses: 0.59%

• Cumulative return for the year: 5.49%

• Distance from historic peak: 101%

iShares MSCI China A ETF (NYSE:CNYA)

• Assets under management: $294.50 million

• Number of titles: 526

• Main titles: Kweichow Moutai Co., Ltd.; Amperex Contemporary Technology Co., Ltd.

• Reference: MSCI China Inclusion Index A

• Net expenses: 0.60%

• Cumulative return for the year: 4.15%

• Distance from historic peak: 70%

Invesco Golden Dragon China ETF (NYSE:PGJ)

• Assets under management: $158.22 million

• Number of titles: 61

• Main titles: Trip.com Group Ltd. (NASDAQ:TCOM), Baidu Inc. (NASDAQ:BIDU)

• Reference: NASDAQ Golden Dragon China Index

• Net expenses: 0.70%

• Cumulative return for the year: 0.69%

• Distance from historic peak: 216%

Franklin FTSE China ETF (NYSE:FLCH)

• Assets under management: $111.49 million

• Number of titles: 962

• Main titles: Tencent; Ali Baba ; PDD

• Reference: FTSE China Capped Index

• Net expenses: 0.19%

• Cumulative return for the year: 7.66%

• Distance from historic peak: 106%

Read now: Biden administration tightens grip on China’s Huawei, revokes key export licenses for US chipmakers

Photo: Shutterstock

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