China Investing Shifting to Mainland Stocks | ETF Trends

Overnight trading in Asian markets on Wednesday night saw an influx of foreign investment into Mainland China, according to KraneShares’ China Last Night.

The MSCI rebalance that happened on Tuesday brought China stocks up to 741 from 730, showing healthy growth at a time when foreign investors are pooling money into Mainland China.

The Shenzhen and Shanghai Stock Exchanges collectively saw northbound flows (foreign investment going into China) of $1.189 in purchased Mainland stocks. Brendan Ahern, CIO of KraneShares and the article’s author, believes that it is a movement by active managers from the beleaguered internet sector and into Chinese securities.

“Remember, active managers can’t eliminate China because it is a good weight,” Ahern said, arguing that even though the internet sector might not be a popular play, for now, investing in China overall is still a good strategy.

Overall, the Shanghai, Shenzhen, and STAR Board (China’s tech-heavy index most akin to the Nasdaq in the U.S.) saw a volume increase of 15.47% in Wednesday’s overnight trading, reflecting 184% of the one year average.

Within the MSCI All Shares, value sectors such as real estate, financials, and staples saw outperformance as Ahern believed active managers adjust portfolios to have growth and value. Within A-Shares, real estate saw a 4.52% gain, financials gained 3.06%, communication gained 2.98%, and staples gained 2.62%.

Investing in China’s A-shares with KBA

Recent regulations in China have created extreme volatility and drawdowns in stocks related to Chinese businesses and markets. KBA invests in the fundamentals in mainland China, something that KraneShares believes continues to be strong.

For investors looking for access to China’s A-share market, the KraneShares Bosera MSCI China A Share ETF (KBA) invests in Chinese A-shares—specifically, the MSCI China A Share Index.

The ETF captures mid cap and large cap representation of Chinese equities listed on the Shenzhen and Shanghai Stock Exchanges, which have been historically closed to U.S. investors. At $757 million in assets under management, KBA remains the largest MSCI-linked China A-share ETF available in the U.S.

KBA offers exposure across various sectors, with 18.28% invested in financials, 16.10% in consumer staples, 14.53% in industrials, 14.31% in information technology, and 11.19% in healthcare as of the end of July.

Holdings in KBA include Kweichow Moutai, a major alcohol producer in China, at 4.80%; Contemporary Amperex Technology, a Chinese battery manufacturer at 2.68%; and China Merchants Bank, the first share-holder commercial bank that is entirely owned by corporate legal groups in China at 2.46%.

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