While global markets have been in turmoil, China country-specific exchange traded funds have been quietly outperforming.
On Friday, the KraneShares Bosera MSCI China A Share ETF (KBA) rose 2.2%.
With the Shanghai lockdowns over, the economy is beginning to pick up. However, while smaller outbreaks are still being managed, they have not significantly weighed on domestic markets, and Beijing has grown more targeted in lockdowns.
As global equities have retreated recently, Chinese markets are staging a strong rebound. The Shanghai Composite and CSI 300 are both enjoying a two-month rally of 13%, Barron’s reported.
China’s mainland markets are still lower for the year, but their recent recovery has made them outperform other developed and emerging markets for the year.
“The Chinese Internet sector has been leading the charge in this recovery,” Goldman Sachs Group analysts wrote in a note this week.
The analysts pointed out that this sector’s astounding 53% rally since mid-March may be attributed to how badly the market suffered last year after regulatory crackdowns crippled the sector and erased over $2 trillion of its market capitalization.
Chinese technology stocks have especially stood out after authorities said they were ending a year-long probe into ride-hail leader Didi Global and two other tech companies, which market observers took as a sign for the better in a battered internet and technology industry.
Furthermore, Beijing has been implementing stimulus measures to bolster the country’s weakening economy. Goldman analysts highlighted positive momentum in all five categories of Chinese easing measures, including monetary, fiscal, property, regulation, and COVID.
“This marks a sharp contrast to the rest of the world, where central banks are tightening policy on an accelerated pace due to inflation concerns and governments are withdrawing unprecedented fiscal stimulus that was provided during the Covid outbreak,” the analysts said. “The divergence of policy cycles between China and the rest of the world continues to be an anchor to our constructive view for Chinese stocks.”
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