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Thelargest China ETFs, iShares MSCI China ETF (MCHI - Free Report) and iShares China Large-Cap ETF (FXI - Free Report) ,lost 1.2% and 1.7% over the past month, 9.3% and 6.4% over the past three months, and 15.9% and 14.3% over the past six months of this year (as of Jul 11, 2023), respectively. Slower-than-expected economic recovery post Covid-19 lockdown led to these downbeat performances.
According to an article by Reuters, global hedge funds emerged as net buyers of Chinese stocks, increasing their allocation in their portfolios. Per the article, Goldman Sachs reports that this is the first time in seven weeks that the hedge funds have turned net buyers, indicating their bullish stance on Chinese stocks. Out of the 11 sectors monitored by the investment bank between Jun 30 and Jul 6, only five sectors saw shares being net sold.
As per CNBC, global investment firm KKR, is bullish on the consumer-oriented industries of China. China’s State Council proposed measures to fuel the consumer demand for household products last month. KKR’s co-CEO Joseph Bae, states that the investment company is optimistic the domestic consumption of the country, calling it a “sweet spot of what we think the market opportunity is.”
With around $6 billion invested in China, KKR aims to seize the opportunity presented by the country's expanding middle class, which consists of around 400 million individuals. Their focus is on pursuing high-quality food and services to cater to the evolving needs and preferences of this growing segment.
Promising U.S.-China Relationship?
During her recent visit to China, U.S. Treasury Secretary Janet Yellen characterized the discussions held between the world's two largest economies as constructive and meaningful. According to CNBC, Yellen emphasized the difference between decoupling and diversifying, stating that the United States was not decoupling with the second-largest economy in the world, which would have global ramifications.
Yellen's visit is part of the continuous endeavours to establish stability in U.S.-China relations following a period of sanctioning curbs and amid an escalating global battle for technological supremacy. Her arrival follows Secretary of State Antony Blinken's visit a few weeks ago, signifying a concerted effort to engage in diplomatic dialogue between the two countries.
Attempt to Rescue Real Estate
People’s Bank of China, the country’s central bank, announced extensions in the policies of the rescue package introduced last November, in an attempt to solve the liquidity problems engulfing the real estate sector.
Per Reuters, the central bank announced on Jul 10, 2023, that it would extend the loan repayment deadline for loans due this year by 12 months, to be repaid by the end of 2024, in a bid to support the cash strapped sector. This move saw shares of Chinese property developers rise.
According to the market sentiment, this move is expected to provide relief in the short term. New measures to tackle the deepening liquidity crisis in the sector are expected to be rolled out.
China to See Economic Stimulus Ahead?
China’s consumer inflation rate was flat in June while factory-gate prices dropped further, fuelling fears about deflation risks and adding to speculation about potential economic stimulus. This could boost Chinese stocks in the coming days. As per a CNBC article, Chinese Premier Li Qiang reiterated the importance of an optimal mix of policies, emphasizing the introduction of specific and harmonized policy initiatives.
Wrapping Up the Financial Crackdown?
China's fintech industry witnessed a regulatory crackdown since late 2020, but signs of conclusion emerge as significant fines are imposed on digital payments giants. According to TechCrunch, Tencent and its subsidiary Tenpay are fined approximately 2.99 billion yuan ($410 million) for prior regulatory breaches. Additionally, Ant Group, Alibaba's fintech affiliate, faces a hefty 7.123 billion yuan (about $1 billion) fine for a variety of illegal activities spanning multiple domains.
With the clampdown of the fintech sector in China likely to reach a conclusion, Chinese tech companies, should get a boost, going forward.
ETFs in Focus
With the Chinese economy expected to rebound to 5.2% growth in 2023 (as per IMF), investing in China through pure-play China ETFs offers a compelling opportunity for investors looking to tap into the potential of one of the world's largest and fastest-growing economies.
Against this backdrop, investors can keep a tab on KraneShares MSCI China Clean Technology Index ETF (KGRN - Free Report) , KraneShares CICC China 5G and Semiconductor Index ETF (KFVG - Free Report) , Global X MSCI China Information Technology ETF and Global X MSCI China Consumer Discretionary ETF (CHIQ - Free Report) . These ETFs are up 8.91%, 7.39%, 3.55% and 3.02%, respectively, over the past month (as of Jul 11, 2023).
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China ETFs Show Potential Amid Dips
Thelargest China ETFs, iShares MSCI China ETF (MCHI - Free Report) and iShares China Large-Cap ETF (FXI - Free Report) ,lost 1.2% and 1.7% over the past month, 9.3% and 6.4% over the past three months, and 15.9% and 14.3% over the past six months of this year (as of Jul 11, 2023), respectively. Slower-than-expected economic recovery post Covid-19 lockdown led to these downbeat performances.
According to an article by Reuters, global hedge funds emerged as net buyers of Chinese stocks, increasing their allocation in their portfolios. Per the article, Goldman Sachs reports that this is the first time in seven weeks that the hedge funds have turned net buyers, indicating their bullish stance on Chinese stocks. Out of the 11 sectors monitored by the investment bank between Jun 30 and Jul 6, only five sectors saw shares being net sold.
As per CNBC, global investment firm KKR, is bullish on the consumer-oriented industries of China. China’s State Council proposed measures to fuel the consumer demand for household products last month. KKR’s co-CEO Joseph Bae, states that the investment company is optimistic the domestic consumption of the country, calling it a “sweet spot of what we think the market opportunity is.”
With around $6 billion invested in China, KKR aims to seize the opportunity presented by the country's expanding middle class, which consists of around 400 million individuals. Their focus is on pursuing high-quality food and services to cater to the evolving needs and preferences of this growing segment.
Promising U.S.-China Relationship?
During her recent visit to China, U.S. Treasury Secretary Janet Yellen characterized the discussions held between the world's two largest economies as constructive and meaningful. According to CNBC, Yellen emphasized the difference between decoupling and diversifying, stating that the United States was not decoupling with the second-largest economy in the world, which would have global ramifications.
Yellen's visit is part of the continuous endeavours to establish stability in U.S.-China relations following a period of sanctioning curbs and amid an escalating global battle for technological supremacy. Her arrival follows Secretary of State Antony Blinken's visit a few weeks ago, signifying a concerted effort to engage in diplomatic dialogue between the two countries.
Attempt to Rescue Real Estate
People’s Bank of China, the country’s central bank, announced extensions in the policies of the rescue package introduced last November, in an attempt to solve the liquidity problems engulfing the real estate sector.
Per Reuters, the central bank announced on Jul 10, 2023, that it would extend the loan repayment deadline for loans due this year by 12 months, to be repaid by the end of 2024, in a bid to support the cash strapped sector. This move saw shares of Chinese property developers rise.
According to the market sentiment, this move is expected to provide relief in the short term. New measures to tackle the deepening liquidity crisis in the sector are expected to be rolled out.
China to See Economic Stimulus Ahead?
China’s consumer inflation rate was flat in June while factory-gate prices dropped further, fuelling fears about deflation risks and adding to speculation about potential economic stimulus. This could boost Chinese stocks in the coming days. As per a CNBC article, Chinese Premier Li Qiang reiterated the importance of an optimal mix of policies, emphasizing the introduction of specific and harmonized policy initiatives.
Wrapping Up the Financial Crackdown?
China's fintech industry witnessed a regulatory crackdown since late 2020, but signs of conclusion emerge as significant fines are imposed on digital payments giants. According to TechCrunch, Tencent and its subsidiary Tenpay are fined approximately 2.99 billion yuan ($410 million) for prior regulatory breaches. Additionally, Ant Group, Alibaba's fintech affiliate, faces a hefty 7.123 billion yuan (about $1 billion) fine for a variety of illegal activities spanning multiple domains.
With the clampdown of the fintech sector in China likely to reach a conclusion, Chinese tech companies, should get a boost, going forward.
ETFs in Focus
With the Chinese economy expected to rebound to 5.2% growth in 2023 (as per IMF), investing in China through pure-play China ETFs offers a compelling opportunity for investors looking to tap into the potential of one of the world's largest and fastest-growing economies.
Against this backdrop, investors can keep a tab on KraneShares MSCI China Clean Technology Index ETF (KGRN - Free Report) , KraneShares CICC China 5G and Semiconductor Index ETF (KFVG - Free Report) , Global X MSCI China Information Technology ETF and Global X MSCI China Consumer Discretionary ETF (CHIQ - Free Report) . These ETFs are up 8.91%, 7.39%, 3.55% and 3.02%, respectively, over the past month (as of Jul 11, 2023).