Exchange traded funds offering access to China’s A-shares equities, the stock’s trading on mainland exchanges in Shanghai and Shenzhen, are among Friday’s top-performing ETFs after the People’s Bank of China surprisingly lowered its benchmark one-year interest rate by 40 basis points to 5.6%.
The PBOC also pared its one-year benchmark deposit rates by 25 basis points to 2.75%. The changes go into effect Saturday. Those are the first PBOC rate cuts in over two years and the cuts come “as factory growth stalls and the property market, long a pillar of growth, is weak, dragging on broader activity and curbing demand for everything from furniture to cement and steel,” according to Reuters.
Despite the backdrop of softer economic data, the rate cuts took center stage, sparking a rally in an array of China ETFs. That includes A-shares funds such as the Deutsche X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR), which have been in focus this week following the Monday debut of the Shanghai-Hong Kong Stock Connect. [A-Shares ETFs Falter on Stock Connect Launch]
Up nearly 5% on volume that appears poised to easily eclipse the daily average, ASHR is not only one of Friday’s top-performing non-leveraged ETFs, but the largest U.S.-listed ETF is also one of just 115 ETFs to hit all-time highs to this point in Friday’s session.
The KraneShares Bosera MSCI China A-Shares ETF (NYSEArca: KBA) and the Market Vectors ChinaAMC A-Share ETF (NYSEArca: PEK), the oldest U.S.-listed A-shares ETF, are also among Friday’s top-performing ETFs each with gains of over 4%. PEK’s volume is already two and a half times the daily average while KBA also touched an all-time high.
The PBOC decision is seen as a boon for Chinese banks because it could give banks more flexibility in setting their own borrowing rates, which could improve access to credit for smaller companies, according to Reuters.