Investors from all around the world are injecting money into exchange-traded funds Focused on Chinese stocks Despite the turmoil over the Chinese government’s intervention that has shaken many stocks and sectors this year.
President Xi Jinping’s “common prosperity” agenda Wipe over $ 1tn From the market value of Chinese equities since February, as a series of regulatory blows have targeted sectors ranging from video games and technology to real estate and education.
According to London’s ETFGI, three China-focused ETFs, ChinaAMC MSCI China A 50 Connect, E Fund MSCI China A 50 Connect ETF, and China Universal MSCI China A 50 Connect ETF, have net inflows worldwide in November. Is in the top 15 of. Base consulting, withdraw a total of $ 4.6 billion.
Even more surprising, according to Goldman Sachs, the KraneShares CSI China Internet ETF (KWEB) has seen a net inflow of $ 7.8 billion since mid-February, more than double the other thematic ETFs listed in the United States. I’m recording.
Some people are looking at the opportunity now The beaten Chinese stock market has fallen by a third on a dollar basis since its peak in February.
“We are reasonably positive about Chinese equities. We believe that the equity risk premium compensates investors for risk. In other words, they are cheap,” said iShares, head of investment strategy in the Emea region. Karim Chedid says.
“Chinese equities are still undervalued in global indices and direction will continue to rise. Now it may be a good opportunity to allocate to a long-term perspective,” he added.
This outlook looks attractive to investors, said Jose Garcia Zarate, associate director of Morningstar’s Passive Strategy Research. “China’s growth is recovering much faster than other economies, which helps explain its interest in equity.”
“Growth slows, but it’s still somewhat stronger than in developed countries,” said Matthew Bartolini, head of SPDR Americas research at State Street Global Advisors. He believed that the recent influx was partly a case where investors tried to buy a dip.
KraneShares ETF’s successful funding endures a year of regulatory turmoil for Chinese tech companies after Jack Ma’s online financial firm Ant Group’s $ 37 billion initial public offering was canceled in November 2020. Nevertheless, it was realized.
KWEB’s share price has fallen 46% so far this year, partly as a result, but major holdings such as Tencent, Alibaba, JD.com, Baidu and Pinduoduo are essential for consumer spending in the world’s second-largest economy. Some people think that it is.
Brendan Ahern, Chief Investment Officer of KraneShares, said:
“At Equity, investors understand that. China is becoming an asset class [in its own right]”He added, pointing out similarities to what happened when Japan diverged from the wider Asia-Pacific region in the 1980s and 1990s.
Strong demand for China’s equity ETFs is reflected in demand for national bond ETFs — the $ 12.1 billion iShares China CNY Bond Ucits ETF (CNYB) Holds Europe’s second largest fixed income ETF, just two years after its launch.
The fate of ETFs focused on China contrasts with the fate of the wider emerging market world. BlackRock’s iShares division data show that the influx of global emerging markets into equity ETFs has collapsed in recent months, replacing Chinese funds and, perhaps more surprisingly, Brazilian fund-led regions. Or it is funded in a single country fund.
“Emerging markets are seeing a decline in Covid-19-related activity and permanent damage from the recession. They aren’t coming back like they are in developed countries,” said Cedid. “Because it’s broad and complex, it looks more difficult, which makes ETF investors more detailed.”
Brazil is “slumping”, he said, and some investors may bet to bottom out as the MSCI Brazil Index has fallen 21.6% on a dollar basis since the beginning of the year. there is.
But I’m not convinced that Bartolini’s data show a net outflow of about $ 2 billion from a single-country EM equity fund this year, except for a $ 13 billion inflow to a Chinese fund. did.
Instead, he saw signs of strategic allocation to the sector. This year, $ 77 billion was invested in most of the cyclical industries such as finance, energy and real estate. This trend is showing signs of reversal in the defense sector, such as healthcare and consumer staple foods. The trend is that investors will finally start pricing in anticipation of similarities in monetary tightening in developed countries.
(Except for the headline, this story has not been edited by The Finance World staff and is published from a syndicated feed.)
