In a year which emerging markets exchange traded funds have been mostly solid, U.S. investors have displayed little appetite for China, the largest developing economy. China ETFs trading in New York, including the iShares China Large-Cap ETF (NYSEArca: FXI), the largest China-related ETF that tracks Chinese companies listed on the Hong Kong stock exchange, are laggard performers.
Not only that, but investors are not being shy about departing US-listed China ETFs. Interestingly, local Chinese investors are doing the opposite as China ETFs trading in Hong Kong are adding assets.
Related: Investors Scamper Out of Well-Known China ETFs
Due to the recent economic weakness, investors have been selling Chinese equities, which are among the emerging world’s worst performers in 2016. The iShares MSCI Hong Kong ETF (NYSEArca: EWH) is also falling out of favor with investors and is bleeding assets.
Departures from EWH, FXI and other China-related ETFs come as investors have been flocking to funds such as the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), the two largest emerging markets ETFs by assets.
[related_stories]“Traders have pulled $1.7 billion from U.S.-traded ETFs focused on China’s mainland and offshore shares this year, data compiled by Bloomberg show. Similar funds available on Chinese exchanges grew by about $1.7 billion during the same period,” reports Elena Popina for Bloomberg.
Earlier this month, China ETFs retreated after index provider MSCI said it is again delaying the inclusion of China A-shares, the stocks trading in Shanghai and Shenzhen, in its widely followed emerging markets indexes.
MSCI attributed its decision to push off on China A-shares inclusion to accessibility of the A shares market for global investors, despite significant regulatory improvements out of Beijing. Specifically, China’s quota system remains a major hurdle for fund investors in the event of redemptions.
Related: China A-Shares ETFs Wait on MSCI Decision
“In addition to the worsening growth outlook, foreign investors have been pulling out amid a surge in debt. Corporate and household borrowing amounted to 215 percent of GDP at the end of the first quarter, the highest level since Bloomberg Intelligence started compiling data in 2003,” according to Bloomberg.
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iShares China Large-Cap ETF
