2 ETFs to Consider as China's Economy Continues to Reopen

Institutional investors are singing the praises of China’s reopening and the avenues of opportunities that it opens up. Goldman Sachs, in particular, noted that the reopening could boost global growth.

“Due to the faster-than-expected rate of reopening, our economists now forecast China’s GDP to grow by 6.5% in 2023 on a Q4/Q4 basis. On top of that, the reopening—and the recovery of Chinese domestic demand—could raise global GDP by 1% by the end of 2023,” Goldman Sachs research by Joseph Briggs and Devesh Kodnani said.

China has had more than its fair share of struggles over the past couple of years. The Evergrande crisis hampered not only the real estate sector, but also overall economic growth as the country was already dealing with a tech slowdown thanks to the government’s crackdown on big tech.

Then last year, a surge of COVID-19 cases forced lockdown restrictions once again, disrupting supply chains and revenue generation for businesses. Now that the government is easing its restrictions and backing off big tech, things are starting to turn around, which bodes well for global growth.

“The global growth backdrop has brightened,” Briggs and Kodnani said in the report. “While we already expected most major economies to avoid recession and China to see a growth rebound from an end to zero-Covid, the more rapid pace of China’s reopening since then—along with a waning drag from global financial conditions and lower European gas prices—has prompted us to upgrade our expectations further.”

2 ETFs to Consider

Given the reopening, KraneShares has a pair of exchange traded funds (ETFs) to consider to capitalize on further upside in China. Once fund to consider is the KraneShares CICC China Ldrs 100 Ind ETF (KFYP), which tracks the CSI CICC Select 100 Index, which takes a smart beta approach to systematically invest in companies listed in mainland China.

The strategy that KFYP employs is based on China International Capital Corporation (CICC)’s latest research on China’s capital markets. This quantitative approach reflects CICC’s top-down and bottom-up research process, seeking to deliver the 100 leading companies in mainland China.

As the economy adjusts to COVID, more consumers will be willing to spend again. That said, consider the KraneShares CICC China Consumer Leaders Index ETF (KBUY).

The fund 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 whose primary business or businesses are in the consumption-related industries such as home appliance, food and beverage, apparel and clothing, hotels, restaurants, and duty-free goods.

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