China A-Shares ETFs Jump as Risk-On Appetite Returns

With the Federal Reserve holding back its interest-rate-hike trigger finger and an improved earnings outlook, emerging market traders have regained their risk appetite, bolstering Chinese stocks and country-specific exchange traded funds.

The Market Vectors ChinaAMC SME-ChiNext ETF (NYSEArca: CNXT) and Deutsche X-trackers Harvest CSI 500 China A-Shares Small Cap Fund (NYSEArca: ASHS) led gains Wednesday, jumping 4.4% and 4.5%, respectively. The China A-shares ETFs track more middle capitalization-weighted companies. Nevertheless, CNXT is still down 19.7% and ASHS is 19.1% lower year-to-date.

Meanwhile, the db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR), the largest China A-shares-related ETF, rose 3.8% Wednesday while the Market Vectors ChinaAMC A-Share ETF (NYSEArca: PEK) advanced 2.9%. Year-to-date, ASHR fell 14.6% and PEK declined 14.7%.

Chinese equities are experiencing their best rally in four weeks after Bank of Communications Co. and China Petroleum & Chemical Corp released better-than-expected earnings and fears of capital flight eased after the yuan currency strengthened and the Federal Reserve’s Chair Janet Yellen pushed off an interest rate hike, reports Kyoungwha Kim for Bloomberg.

China International Capital Corp., which raised its 2016 profit forecasts this week, believes the outlook on earnings growth is improving as the country shows signs of stabilizing. A recent report revealed industrial profits increased 4.8% in the first two months of the year. Traders will also be watching for manufacturing data Friday.

Deutsche Bank AG strategists led by Yuliang Chang also argued that the stronger industrial profit growth was an “encouraging sign” as A- and H-share non-financial earnings may improve in the first quarter on their high correlation to industrial data.