After a precipitous sell off since the June highs, some have warmed up to Chinese equities, finding value in China stocks and country-specific exchange traded funds.
ETF investors who are interested in the Chinese market have a number of options to choose from. For instance, the iShares China Large-Cap ETF (NYSEArca: FXI) is the largest China-related ETF that tracks Chinese companies listed on the Hong Kong stock exchange. Similarly, other China H-shares ETFs options include the SPDR S&P China ETF (NYSEArca: GXC) and the iShares MSCI China ETF (NYSEArca: MCHI).
Over the past month, FXI gained 12.2%, GXC rose 11.1% and MCHI returned 11.5%.
Additionally, investors can take a look at China A-shares ETFs that track mainland Chinese stocks traded in Shanghai and Shenzhen, including the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR), KraneShares Bosera MSCI China A ETF (NYSEArca: KBA) and Market Vectors ChinaAMC A-Share ETF (NYSEArca: PEK).
Over the past month, ASHR increased 12.4%, KBA added 10.5% and PEK advanced 9.7%.
Traders have cut bearish bets on A-shares ETFs to a four-month low on expectations that the latest policy effort to stimulate China’s economy and a postponed U.S. interest rate hike would help stabilize the A-shares market, reports Taylor Hall for Bloomberg.
Specifically, short interest in ASHR fell 9.2% as of Friday, the lowest since June 9 and down from a record 25% in August.
The A-shares ETFs continued to advance on the New York Stock Exchange, along with Chinese stocks in Hong Kong, as China’s markets remained closed until October 8 for a week long holiday. Chinese equities were strengthening after Beijing took steps to support specific sectors.
“Recent data and measures by the government, including reducing down payments on first home purchases, reduced tax on autos, easing interest rates since the beginning of the year — all of this has been slightly positive,” Gabriel Wallach, founder of North Grove Capital LLC, told Bloomberg.
The optimistic outlook and cheap valuations have attracted the attention of large investors. For instance, Algebris LLP, a large London-based hedged fund, has been throwing tens of millions into Chinese stocks, betting that the August selloff marked a turning point, the Wall Street Journal reports.
“We are long Chinese equities for the first time in our history,” Davide Serra, chief executive of Algebris, told the WSJ, adding the probability of a full blown economic collapse in China is lower than what the market estimates.
iShares China Large-Cap ETF
For more information on the Chinese markets, visit our China category.
Max Chen contributed to this article.