“Morgan Stanley equity strategists Jonathan F Garner, Laura Wang and Corey Ng list three possible reasons for the rise: a return of earnings growth, a rotation by domestic investors from bonds and real estate to equities, and projections for significant Initial Public Offering fundraising in 2017,” reports Dimitra DeFotis for Barron’s.
Yuan weakness has been a point of contention for investors considering China, but that scenario could change for the better. The Chinese currency will strengthen when the yuan enters the International Monetary Fund’s basket of reserve currencies as it joins the dollar, euro, pound and yen. With the importance of the yuan growing as an alternative to the U.S. dollar, investment flows into China could help support Chinese markets and country-specific exchange traded funds.
“Our economists are highlighting a relatively tighter monetary policy and capital controls at the start of 2017 but the main planks of our optimism for onshore China equities in 2017 are intact: a) a return to earnings growth and b) asset class rotation away from bonds and property back to stocks,” according to Morgan Stanley in a note posted by Barron’s.
The Deutsche X-trackers CSI 300 China A-Shares Hedged Equity ETF (NYSEArca: ASHX) acts as a hedged version of the popular ASHR while the CSOP MSCI China A International Hedged ETF (NYSEArca: CNHX) is another option for investors looking to hedge yuan exposure.
For more information on China, visit our China category.