While global economies continue to deal with the shocks of the coronavirus pandemic, China’s markets, along with related ETFs, have more or less recovered from this year’s selling.
China’s benchmark CSI 300 Index on Friday closed up 0.05% year-to-date, recouping its earlier losses for the year, the Wall Street Journal reports.
Meanwhile, the Xtrackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR), which tracks the CSI 300 Index, remains 2.6% lower year-to-date after rising 13.7% over the past three months. The difference between the ETF’s performance and the Chinese benchmark may be partially associated with currency depreciation after the Chinese yuan weakened 1.8% against the U.S. dollar this year.
Analysts and investors argued that China benefited from being the “first in, first out” after grappling with the coronavirus and recovering from its economic fallout, even if the emerging economy continues to fight off a small outbreak in Beijing.
Willie Chan, Maybank Kim Eng Securities’ regional strategist in Hong Kong, argued that the easier financial conditions from supportive monetary policies have helped prop up the Chinese stock market, highlighting the increased credit and loan growth.
Additionally, Loke Wen Wei, a fund manager at Phillip Capital Management, pointed out that the Chinese financial system is flush with funds and foreigners are also dipping back into mainland Chinese A-shares as more try to chase after the rebound. “When you have momentum, people go for it,” he told the WSJ.
Foreign investors funneled a net 114.8 billion yuan, or $16.2 billion, into onshore Chinese stock this year through the Hong Kong Stock Connect, a program linking mainland markets and Hong Kong, according to Wind data.
China’s outperformance compared to other major international markets has stood out this year. While global markets convulsed plunged to their lows in March, China’s equity markets did less poorly, partly due to the country’s comparative insulation from the global financial system and the support from millions of individual investors in its domestic markets.
Looking ahead, Morgan Stanley analysts this week raised their target for the CSI 300 on strong earnings growth expectations. China’s economy is expected to return to its longer-term potential growth rate by the fourth quarter, due to a combination of fiscal easing, a normalized industrial sector and a smooth reopening of the services sector.
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