China made announcements over the weekend that it would be providing monetary support and incentive to boost consumption across the country as it seeks to reach its 5.5% GDP goal for the year. Foundational policy support is likely to be a tailwind this year within China and create several investment opportunities as the country moves towards recovery.
China’s premier Li gave supportive statements over the weekend that named 2023 “the year of the consumption boost” according to Brendan Ahern, CIO of KraneShares, in the China Last Night blog. On the tail of the announcement came guidance from Shanghai that it would be enacted 32 measures to aid in recovery and meet economic goals, measures that included subsidies for home appliances as well as electric vehicles.
The announcements were met with enthusiasm from international investors according to Ahern: “Foreign investors bought a healthy $2.76 billion worth of Mainland stocks overnight via Northbound Stock Connect, with a bias towards large/mega cap growth stocks.”
An Update on COVID in China
COVID-19 remains an element of risk and uncertainty as it continues to sweep the country, spreading to rural areas recently, but the wave of severe cases and deaths appears to be cresting according to China’s CDC. The peak aligns with the timing that analysts expected from the wave of COVID unleashed on the country when the zero-COVID policy was rolled back according to the BBC.
“This drop in deaths follows the decline in the first huge wave of cases after China relaxed its restrictions, which is understandable and has been seen in virtually every country experiencing a large Covid wave,” Hsu Li Yang, infectious diseases expert, told the BBC.
Within China, people are on the move once more: 226 million passenger trips were taken in the week of celebrations for the Lunar New Year between January 22-27, a 70% rise over the same time last year.
“We will know soon if the Lunar New Year celebrations will trigger another surge in China cases, but it is unlikely to match what was experienced in December and the earlier part of January 2023,” Hsu said.
Investing in China’s Impending Consumption Boom With KBUY
The KraneShares CICC China Consumer Leaders Index ETF (KBUY) benefits in an environment of increased liquidity due to the resultant increase in consumer spending.
KBUY tracks the CICC China Consumer Leaders Index, which invests in the publicly traded, China-based companies that make up the consumer industries in the country. These include apparel and clothing, hotels, restaurants, home appliances, food and beverage, and duty-free goods.
KBUY’s index selects the top 30 companies ranked by their long-term operating income and cash flow, market cap, long-term return on equity, and long-term gross profit. These companies are included in the index and weighted by free-float market cap, with no singular company representing more than 15% of the underlying index.
KBUY carries an expense ratio of 0.68%.
For more news, information, and analysis, visit the China Insights Channel.