The equities markets and exchange traded funds ended the month of April on a sour note after broad U.S. benchmarks peaked new heights in the prior week.
Over April, the Dow Jones Industrial Average rose 0.4%, the Nasdaq Composite increased 0.8% and the S&P 500 gained 0.9%.
The best performing non-leveraged exchange traded products over the past month include the Global X China Materials ETF (NYSEArca: CHIM) up 29.1%, Global X China Industrials ETF (NYSEArca: CHII) up 28.5% and Global X NASDAQ China Technology ETF (NasdaqGM: QQQC) up 25.9%.
Chinese company stocks traded on the Hong Kong stock exchange were leading the charge over April on pent up demand, following the rally in mainland China’s market. [China H-Shares ETFs Get Their Moment in the Limelight]
Fueling the trades, mainland investors were using up their quota to invest in Hong Kong through the recently adopted Shanghai-Hong Kong Stock Connect program for the first time since it began in November. Notable interest came from mainland mutual funds accessing Stock Connect, which was previously limited to wealthy individuals. Many mainland investors were piling into Hong Kong-listed Chinese company stocks, capitalizing on the steep discounts to mainland-listed share prices.
Moreover, Chinese equities were rallying in response to the People’s Bank of China’s new stimulus measures, including lowering the cash reserve requirements for big banks. The central bank is also planning more initiatives down the line, including a so-called Pledged Supplementary Lending program that would allow banks to use local government bonds as collateral for loans from the central bank, reportsAlan R. Elliott for Investor’s Business Daily.
The worst performing non-leveraged exchange traded products over the past month include the UBS ETRACS ISE Exclusively Homebuilders ETN (NYSEArca: HOMX) down 15.2%, iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) down 14.9% and VelocityShares Daily Long VIX Short-Term ETN (NYSEArca: VIIX) down 14.8%.
Despite the fall off in the last few days of the month, the equities market were largely strengthening through April.
The month started off on a positive note, with improved housing and personal income data.
Additionally, a faltering U.S. dollar helped raise the outlook for large-cap stocks with significant overseas operations. The rising oil prices also supported a rebound in the energy sector.
While the government reported some softening data, such as weaker employment growth and manufacturing, the markets took the news in stride, lifting equities on expectations that the Federal Reserve would push back interest rate hikes.
In mid-April, China came out with its increased stimulative efforts to help push its economy along, fueling optimism across the globe.
Meanwhile, the problems in Greece have not devolved into another financial crisis mode with massive default fears as talks in the Eurozone appear constructive.
However, the markets took a turn in the finally days of April after the government revealed a worse-than-expected 0.2% gain in Gross Domestic Product for the first quarter. Additionally, the Federal Open Meeting Committee remained mostly dovish in response to the anemic growth. Still, some argue that the first quarter numbers were a one-time deal due to a frigid weather-related slowdown.
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Max Chen contributed to this article.