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Amidst a backdrop of uncertainty and market turbulence, China's largest mutual fund houses have once again pledged to buy their own equity-focused products. At least 14 firms pledged to invest in their funds as of mid-Monday, taking the total tally to 870 million yuan ($119 million), per Bloomberg, as quoted on Yahoo Finance.
E-Fund Management Co. and China Asset Management Co., among others, have each committed 50 million yuan ($6.8 million), citing their long-term confidence in the market's potential. Additionally, Guotai Junan Securities Co.'s asset management unit has committed a substantial 200 million yuan, emphasizing its commitment to sharing market risks with investors.
Despite a series of measures implemented to stabilize the markets, the selloff in Chinese stocks has persisted mainly due to the real estate crisis. While default fears of bond payments by developer Country Garden are mounting, China’s property giant Evergrande has filed for U.S. bankruptcy protection. Notably, Evergrande defaulted on its huge debts in 2021, which sent shockwaves through global financial markets.
Should You Buy the Dip?
Mutual fund pledges to buy their own products during stock-market downturns have become a familiar sight. Similar moves were witnessed at the beginning of 2022 and during the pandemic-induced selloff in early 2020.
While such gestures can boost short-term market sentiment, the current situation seems to differ due to an underlying lack of investor confidence and the absence of a discernible trigger for a positive market shift. Moreover, foreign funds have continued to divest mainland shares through links with Hong Kong.
Any Ray of Hope?
Monetary and fiscal policy easing are likely to shore up growth. Government looks to use up 2023 special bond quota by September. More rate cuts are likely in the cards.China’s state banks are leaving no stones unturned to boost consumer spending, directed by policymakers. These banks are considering lowering deposit rates for at least the third time in a year, according to people familiar with the matter, as quoted on Bloomberg.
China's central bank surprised the market by announcing its second key policy rate cut in three months on Aug 17, 2023, indicating a heightened commitment to stimulate the struggling economic recovery. However, the one-year LPR was lowered by 10 basis points to 3.45% from 3.55% on Aug 21, a smaller cut than most economists predicted
ETFs in Focus
Against this backdrop, below we highlight a few China ETFs that offer lower P/E ratios. These ETFs have a lower P/E ratios than the 17.86X P/E offered by the S&P 500.
Image: Bigstock
Time to Buy the Dip in China ETFs?
Amidst a backdrop of uncertainty and market turbulence, China's largest mutual fund houses have once again pledged to buy their own equity-focused products. At least 14 firms pledged to invest in their funds as of mid-Monday, taking the total tally to 870 million yuan ($119 million), per Bloomberg, as quoted on Yahoo Finance.
E-Fund Management Co. and China Asset Management Co., among others, have each committed 50 million yuan ($6.8 million), citing their long-term confidence in the market's potential. Additionally, Guotai Junan Securities Co.'s asset management unit has committed a substantial 200 million yuan, emphasizing its commitment to sharing market risks with investors.
Despite a series of measures implemented to stabilize the markets, the selloff in Chinese stocks has persisted mainly due to the real estate crisis. While default fears of bond payments by developer Country Garden are mounting, China’s property giant Evergrande has filed for U.S. bankruptcy protection. Notably, Evergrande defaulted on its huge debts in 2021, which sent shockwaves through global financial markets.
Should You Buy the Dip?
Mutual fund pledges to buy their own products during stock-market downturns have become a familiar sight. Similar moves were witnessed at the beginning of 2022 and during the pandemic-induced selloff in early 2020.
While such gestures can boost short-term market sentiment, the current situation seems to differ due to an underlying lack of investor confidence and the absence of a discernible trigger for a positive market shift. Moreover, foreign funds have continued to divest mainland shares through links with Hong Kong.
Any Ray of Hope?
Monetary and fiscal policy easing are likely to shore up growth. Government looks to use up 2023 special bond quota by September. More rate cuts are likely in the cards.China’s state banks are leaving no stones unturned to boost consumer spending, directed by policymakers. These banks are considering lowering deposit rates for at least the third time in a year, according to people familiar with the matter, as quoted on Bloomberg.
China's central bank surprised the market by announcing its second key policy rate cut in three months on Aug 17, 2023, indicating a heightened commitment to stimulate the struggling economic recovery. However, the one-year LPR was lowered by 10 basis points to 3.45% from 3.55% on Aug 21, a smaller cut than most economists predicted
ETFs in Focus
Against this backdrop, below we highlight a few China ETFs that offer lower P/E ratios. These ETFs have a lower P/E ratios than the 17.86X P/E offered by the S&P 500.
Global X MSCI China Utilities ETF – P/E 8.98X
Global X MSCI China Materials ETF – P/E 9.41X
SPDR S&P China ETF (GXC - Free Report) – P/E 10.38X
iShares China Large-Cap ETF (FXI - Free Report) – P/E 10.62X
iShares MSCI China ETF (MCHI - Free Report) – P/E 10.89X