Strong Holiday Sales Could Prop Up This China Retail ETF

China’s retail sector showed signs of improvement during the month of October, giving bullish investors optimism that the country is working out its economic growth woes.

“Retail sales grew by 7.6% last month from a year ago, above the 7% growth forecast by a Reuters poll,” reported CNBC.

The major hurdle toward improved economic growth remains its real estate sector, which comprises a sizeable portion of China’s economy.

“Clearly, the property sector remains a weak spot for the economy, which requires further support in the foreseeable future,” said Hao Zhou, chief economist at Guotai Junan International.

Improved retail sales could be helped with the holidays potentially propping up demand for Chinese products, especially in the United States and Europe. This could be the additional buoy that China needs to shore up its economy while it works out its real estate issues.

“For Christmas shoppers in Europe and North America, I’d say broadly the supply picture coming out of China this year is vastly better than it has been for the past few years,” said Even Pay, an analyst at Trivium China, via a Financial Times report. Falling shipping costs, the end of zero-COVID controls, and overcapacity in the domestic metals and materials sector meant fewer constraints on China’s supply of manufactured goods, Pay added.

“We’re seeing a lot of deflationary pressures [building]in the goods market,” said Frederic Neumann, chief Asia economist at HSBC. “And that’s fantastic for western consumers hoping to buy.”

A China-Focused Retail ETF

Investors who want to add China-focused retail exposure ahead of the holidays can take advantage of the KraneShares CICC China Consumer Leaders Index ETF (KBUY). Additionally, the prospects of China improving its economic growth and working out its real estate issues can set up the retail sector for future upside.

The recent uptick in sales could be an early sign that the economy could be improving.

“The data suggests that the recovery was struggling to gain a strong footing at the start of the fourth quarter, but it was not nearly as weak as some had feared,” said analysts at Capital Economics, via a South China Morning Post article.

“Nonetheless, we still expect a modest reacceleration in growth over the coming months. Policy looks set to remain supportive, and possibly even stepped up to prevent the economy from backsliding.”

KBUY seeks to measure the performance of the CICC China Consumer Leaders Index. The index consists of the investable universe of publicly traded China-based companies. It focuses on those whose primary business is in the consumption-related industries such as home appliances, food and beverages, apparel and clothing, hotels, restaurants, and duty-free goods.

For more news, information, and analysis, visit the China Insights Channel.