China’s policymakers stated they could take further action to bolster the slowing economy, potentially signalling additional support for Chinese markets and A-shares related exchange traded funds.
On Monday, the db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR) and Market Vectors ChinaAMC A-Share ETF (NYSEArca: PEK), which both track the CSI 300 Index, rose 2.7% and 2.9%, respectively, while the KraneShares Bosera MSCI China A ETF (NYSEArca: KBA), which tracks the MSCI China A Index, increased 2.6%. Over the past year, ASHR advanced 4.7%, PEK gained 5.3% and KBA was up 1.6%.
Chinese markets strengthened Monday after Beijing signaled the government could widen the fiscal deficit and stimulate the housing market, Bloomberg reports.
According to Xinhua News Agency, monetary policy will be more “flexible” and fiscal policy more “forceful” as leaders target “appropriate monetary conditions for structural reform.”
“Expanding the fiscal deficit ratio is the best choice available,” Yao Wei, a China economist at Societe Generale SA, told Bloomberg. “More flexibility in monetary policy means further easing, even as a supplement to fiscal policy.”
President Xi Jinping has stated the government is targeting economic growth of at least 6.5%, its weakest expansion since 1990. Observers are concerned about the slowdown in the economy after gross domestic product slipped below this year’s target rate of about 7%.
“They have a challenge to restore their own credibility, and to that end we’ll see concerted easing efforts in order to try to turn the economy around, at least in the short term,” Mark Williams, the chief Asia economist at Capital Economics Ltd., told Bloomberg. “It’s clear that policy in a broad sense is still being eased, and it’s reasonable to expect looser fiscal policy next year and also looser monetary policy.”