Record bank loans and speculation of increased measures to stimulate economic growth helped China’s markets, along with related A-shares exchange traded funds, experience their largest surge in over three months.
The Shanghai Composite Index rose 3.3% to 2,836.6 Tuesday, but the benchmark is still trading in a bear market and down 20% so far this year. Leading the Tuesday rally, the industrials and technology sectors pushed ahead.
The largest China A-shares ETF, the Deutsche X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR), which includes a hefty 40.7% tilt toward the financial sector, rose 5.7%.
On the other hand, China A-shares ETFs with a greater position in tech and industrials outperformed on Tuesday. The Market Vectors ChinaAMC SME-ChiNext ETF (NYSEArca: CNXT), which includes 37.9% tech and 17.3% industrials, surged 8.9%. The Deutsche X-trackers Harvest CSI 500 China A-Shares Small Cap Fund (NYSEArca: ASHS), which includes 21.9% industrials and 15.4% tech, jumped 8.6%.
Meanwhile, the Direxion 2x Daily CSI 300 China A Share ETF (NYSEArca: CHAU), the first leveraged A-shares ETF to list in the U.S., increased 11.8% Tuesday.
Chinese equities rebounded after data revealed the country’s banks issued a record amount of loans in January, Bloomberg reports.
Moreover, supporting the flagging economy, Beijing is expected to release a package of measures to ensure growth hits its targets this year.
“The credit growth is driven by government efforts to boost liquidity and an increase in corporate financing,” Ken Chen, an analyst at KGI Securities Co, told Bloomberg. “Economic indicators did not look pretty in January and many enterprises were facing losses or profit declines. To avoid defaults, the government stepped up easing and essentially delayed the exposure of credit risks. Government departments are also preparing funds for large projects to be launched.”
Due to the recent economic weakness, investors have been selling Chinese equities, which has fallen the most among global markets after Greece’s this year.
The steep fall off has created bargains among Chinese equities trading in Hong Kong, according to Mark Mobius, emerging markets fund manager at Franklin Templeton Investments.
“The market already presents itself with opportunities to pick stocks at a bargain -– companies which have been unduly punished by panicked sell-offs and volatility,” Mobius told Bloomberg. “Fundamentals in China still remain positive.”
Looking at China ETF options, the iShares China Large-Cap ETF (NYSEArca: FXI) and SPDR S&P China ETF (NYSEArca: GXC) both track Chinese companies listed on the Hong Kong stock exchange, or H-shares. GXC trades at a 8.58 price-to-earnings and a 0.97 price-to-book, compared to ASHR’s 13.54 P/E and 1.99 P/B.
Deutsche X-trackers Harvest CSI 300 China A-Shares Fund
Max Chen contributed to this article.