“We are seeing the government licensing private lenders to the markets, adding pressure on funding cost and competition,” according to J.P. Morgan. “Note, 22 private-owned banks’ titles were approved by State Administration for Industry and Commerce as of Oct 30, according to the Securities Daily.”

Consequently, J.P. Morgan argues for selling banks into the rally due to tighter regulation and liquidity, financial/land reform.

Most China-related ETFs have a heavy weighting in the financial sector. For instance, the iShares ETF has 57.4% in financials. However, investors who are still interested in China but are wary about financial stocks can take a look at the WisdomTree China Dividend ex-Financials Fund (NYSEArca: CHXF), which cuts out financial exposure all together. CHXF is down 1.0% year-to-date. [China ETF Investors Can Mix and Match Flavors]

Some other broad China ETFs include:

  • iShares MSCI China ETF (NYSEArca: MCHI): up 3.0% year-to-date
  • SPDR S&P China ETF (NYSEArca: GXC): up 7.9% year-to-date
  • PowerShares Golden Dragon China Portfolio (NYSEArca: PGJ): up 51.7% year-to-date
  • db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR): up 5.5% over the past week [An ETF to Gain Direct Access to China A-Shares]
  • Guggenheim China All-Cap Fund (NYSEArca: YAO): up 8.3% year-to-date

iShares China Large-Cap ETF

For more information on China, visit our China category.

Max Chen contributed to this article.