China stocks outperformed last week on reopening hopes, which sent the ETFs rallying. In particular, KraneShares CSI China Internet ETF KWEB, Invesco Golden Dragon China ETF PGJ, Global X MSCI China Consumer Discretionary ETF CHIQ, KraneShares Hang Seng TECH Index ETF KTEC, and Invesco China Technology ETF CQQQ were the winners, gaining more than 15%.
In fact, China stocks logged in the best week since March. A number of cities started loosening Covid-related restrictions, potentially attracting fresh inflows. Shanghai residents will no longer require a negative Covid test result to enter outdoor venues, including parks and scenic attractions. Hong Kong began scaling back anti-COVID measures slightly ahead of China, given that the city had a much lower infection rate. Beijing and Shenzhen announced over the weekend they would lift measures that required commuters to show negative Covid test results before travel, despite the recent wave of infections.
The easing of restrictions will help spur a recovery in the Chinese economy, which was driven close to contraction territory by continued COVID-linked disruptions. The latest shift in China’s Covid regulations also increased optimism for investors betting on further reopening in the wider region, stretching to Macao’s casino sector (read: Why China Stocks & ETFs are Soaring).
Given a sudden positive shift, Morgan Stanley raised its recommendation rating for Chinese equities to overweight. Other analysts like Goldman and BofA Strategists recently turned bullish on China stocks. Goldman expects both the MSCI China benchmark and the CSI 300 Index to rise by 16% in the next 12 months. Meanwhile, fund titans like Franklin Templeton Investments and Eastspring Investments are joining a growing list of money managers snapping up Chinese stocks on bets that Beijing’s shift from Covid Zero will bring significant gains.
ETFs to Bet On
KraneShares CSI China Internet ETF (KWEB) – Up 24.4%
KraneShares CSI China Internet ETF provides concentrated exposure to China-based companies whose primary business, or businesses are focused on Internet and Internet-related technology. KraneShares CSI China Internet ETF tracks the CSI China Overseas Internet Index and holds 43 securities in its basket, with a higher concentration on the top firms.
KraneShares CSI China Internet ETF has amassed $5.8 billion in its asset base and charges 69 bps in annual fees from investors. KWEB trades in an average daily volume of 23.5 million shares and currently has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook (read: Best ETF Areas of November).
Invesco Golden Dragon China ETF (PGJ) – Up 22.5%
Invesco Golden Dragon China ETF follows the NASDAQ Golden Dragon China Index, which offers exposure to the U.S. exchange-listed companies that are headquartered or incorporated in the People’s Republic of China. It holds a basket of 67 stocks with a higher concentration on the top firms. Consumer discretionary and communication services sectors take the largest share at 56.6% and 21.4%, respectively.
Invesco Golden Dragon China ETF has AUM of $210.7 million and charges 70 bps in annual fees. It trades in an average daily volume of 159,000 shares and has a Zacks ETF Rank #5.
Global X MSCI China Consumer Discretionary ETF (CHIQ) – Up 21.1%
Global X MSCI China Consumer Discretionary ETF offers exposure to the consumer discretionary sector in China by tracking the MSCI China Consumer Discretionary 10/50 Index. Holding 73 securities in its basket, it is moderately concentrated on the top three firms.
Global X MSCI China Consumer Discretionary ETF has AUM of $277.7 million and charges 65 bps in annual fees. It trades in an average daily volume of 117,000 shares and has a Zacks ETF Rank #5 with a Medium risk outlook (see: all the Emerging Asia Pacific ETFs here).
KraneShares Hang Seng TECH Index ETF (KTEC) – Up 19.4%
KraneShares Hang Seng TECH Index ETF offers exposure to the 30 largest companies in Hong Kong's rapidly growing technology sector. It tracks the Hang Seng TECH Index, which measures the performance of innovative companies with strong research & development investment, high revenue growth, and themes such as cloud, e-commerce, fintech and Internet.
KraneShares Hang Seng TECH Index ETF charges 68 bps in annual fees and has accumulated $6.6 million shares in its asset base. It trades in an average daily volume of 20,000 shares and has a Zacks ETF Rank #5.
Invesco China Technology ETF (CQQQ) – 16.3%
Invesco China Technology ETF follows the FTSE China Incl A 25% Technology Capped Index, which includes constituents of the FTSE China Index and FTSE China A Stock Connect Index that are classified as information technology securities, including China A-shares and China B-shares. It holds 130 stocks in its basket with a concentration on the top three firms.
Invesco China Technology ETF manages an asset base of $837.2 million while charges 70 bps in fees per year. It trades in volume of 253,000 shares per day on average and has a Zacks ETF Rank #5 with a High risk outlook.
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