Investors have not been deterred. With $94.3 million in assets under management as of April 7, CHIX is not in the conversation about the biggest China ETFs. However, it cannot be ignored that nearly a third of those assets have come into the fund this year.
An accommodative People’s Bank of China’s, which is among the more than 20 global central banks to cut interest rates this year, could be a positive catalyst for CHIX and the ETF’s constituents. The largest state-backed banks could benefit from the grater flexibility to set rates. These banks won’t have to compete for deposits since the average saver will feel these banks are safer as a government-controlled entity.
Banks could eventually extend more loans to private borrowers where they can demand higher rates. However, the large spreads between private and state-owned borrowers have persisted, suggesting banks will be slow to ditch the reliability of state-backed companies. Consequently, doing business with state-owned firms remains a common theme as safety trumps risk and potentially better returns for now.
Global X China Financials ETF
