Back to top

Image: Bigstock

What Lies Ahead for China ETFs in the Year of Rabbit?

Read MoreHide Full Article

Over the years, China’s economy has become a key gauge of global economic and investment health. China’s $13 trillion economy, second in size just after the United States, makes up about a third of global growth each year. So, if China’s debt-ridden economy’s growth slows down and stocks fall on Covid-19 scare, which actually has been the case of late, the global economy will have to pay the price for it, in some way or the other.

The key China ETFs, including iShares China Large-Cap ETF FXI, SPDR S&P China ETF (GXC - Free Report) and iShares MSCI China ETF (MCHI - Free Report) have lost 15%, 14.2% and 14%, respectively past year. Against this backdrop, China stepped into its Lunar New Year — the Year of the Water Rabbit — on Jan 22, 2023. Let’s find out what’s in store for China ETFs this year.

Recap of the Tiger Year or 2022

China ETFs were mainly under pressure due to regulators’ crackdown on various sectors, mainly the all-important technology space. The stringent COVID-related policies and lockdowns, as well as a crisis in the debt-laden real estate sector,  weighed on Chinese equities in the early phase of last year.

However, things started to change for the better as the year progressed. China ETFs that were hit hard in early 2022 started to spring higher. Chinese tech equities started rebounding as the nation’s top political leaders planned to boost economic stimulus to promote growth. There were chances of an easing of the continued clampdown on tech firms.

What Lies Ahead in the Year of the Water Rabbit?

China reopened its economy at the end of the Tiger year. This was a plus for economic activities although the spread of Covid-19 was rife and the death toll continued to rise. China said that 80% of the population is now infected.

The Water Rabbit is said to bring prosperity, luck and happiness. “The Year of Water Rabbit is going to be a gentler year. We’ll have time to take a breather. We’ve been in the tunnel for the last few years, and the light is getting bigger now,” said Thierry Chow, a Hong Kong-based geomancy consultant, as quoted on CNN.

With equity valuations appearing decent, corporate earnings on verge of a rebound, zero-Covid policy ending and stimulus being showered on the struggling Chinese property market, investors may expect to earn positive returns this year.

CLSA predicts that from a Feng Shui perspective, fire-related industries such as oil & gas, fashion and tech should have the most auspicious year, with the best time in late spring. Similarly, fortunes for the sectors linked with wood, which include healthcare, education and plantations, should be fairly decent.

Against this backdrop, below we highlight a few China ETFs that could see success in 2023.


China is becoming a world leader in advanced Information Technology hardware production, focusing on 5G equipment and semiconductors.

Direxion Daily CSI China Internet Index Bull 2x Shares (CWEB - Free Report) – Up 24.0% YTD

KraneShares CSI China Internet ETF (KWEB - Free Report) – Up 12.4% YTD


With Covid-19 wreaking a havoc, China is focusing a lot on the healthcare market. China is vowing to shell out more money to help prevent and control the spread of Covid-19. The country will also build channels that will provide local governments cheaper access to critical medical supplies.

Global X MSCI China Health Care ETF (CHIH - Free Report) – Up 15.5% YTD

Loncar China BioPharma ETF (CHNA - Free Report) – Up 15% YTD

Broader China

As China reopened its economy following a strict zero-COVID policy and Beijing pledged for additional policy support to boost the ailing domestic economy, broader market is sure to make a solid comeback.

Franklin FTSE China ETF (FLCH - Free Report) – Up 12.8%

iShares MSCI China ETF (MCHI - Free Report) – Up 12.7%


Published in