The iShares China Large-Cap ETF (NYSEArca: FXI), the largest China exchange traded fund listed in the U.S., is up more than 13% year-to-date and that is just one sign equities in the world’s second-largest economy offer more upside potential as emerging markets stocks continue surging.
Ongoing reforms, notably from the supply side, could further support Chinese economic growth. Reforms have bolstered industrial profitability and strengthened commodity prices. China’s exporters are also enjoying improvements from a rebound in global trade.
The Chinese economy is also shifting towards domestic-oriented consumption as a main growth driver. Consequently, consumption-driven sectors liek technology and services are becoming a growing component in the economy.
“The Shanghai Exchange (SSEC) went through a very important bull market test last year, and successfully passed the test, see 2800 points. That was the ultimate confirmation that the bull market would continue,” according to ETF Daily News. “Third, the bull market will remain silent as long as SSEC trades below the middle trend line within the channel. Once above it, the bull will become violent. Fourth, China has a strong reputation of moving in a very aggressive way once a bull market starts heating up. Expect fireworks somewhere in the coming years, similar to 2015.”
Investors looking to access stocks listed in Shanghai and Shenzhen, also known as A-shares, can consider ETFs such as the VanEck Vectors ChinaAMC SME-ChiNext ETF (NYSEArca: CNXT), VanEck Vectors ChinaAMC CSI 300 ETF (NYSEArca: PEK), iShares MSCI China A ETF (BATS: CNYA) and db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR).
PEK tracks the CSI 300 Index, which includes the 300 largest and most liquid stocks in the China A-shares market. CNXT includes the 100 largest China A-shares stocks listed on the Small and Medium Enterprise Board and the ChiNext Board of the Shenzhen Stock Exchange. CNYA tracks an MSCI index composed of Chinese equities listed on the Shanghai and Shenzhen Stock Exchanges. ASHR also tracks A-shares taken from the CSI 300 Index.
“The longer the silent uptrend, the higher the upside potential, as the channel is moving higher. Sixth, the dotted lines on the chart show why 3500 points is in a way a breakout point, once above 3500 things are very bullish. Last but not least, the risk reward ratio is high at this point, given the position of the market (lower area with the trending channel),” according to ETF Daily News.
For more information on the Chinese markets, visit our China category.