Mainland China stocks soared Monday, notching their best single-day rally in 16 years. Supportive policy moves from Beijing lifted sentiment higher, with China stocks and related ETFs surging to start the week.
The Shenzhen Composite Index ended the day Monday up 10.9%, the best day in nearly three decades for the index, reported CNBC. Meanwhile, the Shanghai Composite Index rocketed up 8.06% on Monday, the best single day since September 2008.
The moves follow in the wake of several announcements last week from Beijing that aimed to boost economic growth in the country. Among the policies were several aimed at encouraging growth and recovery in the still-beleaguered property sector.
The People’s Bank of China (PBOC) announced Sunday it would allow borrowers to renegotiate their mortgages beginning Nov. 1. Those with a large enough divergence between their existing mortgage rate and the current market rate will qualify. It also reworked current stipulations that delayed implementation of reduced rates until January of the following work. Under the new policy, banks can adjust their rates at any time.
The PBOC also announced changes relevant to the stock markets that included the introduction of “securities, funds and insurance companies’ swap facilities and stock repurchases,” reported KraneShares in the China Last Night blog.
Foreign investors responded with enthusiasm, flooding into Mainland China markets. “Market action indicates for the first time that investors are removing money from historically overweight Asian countries (Japan, India, Taiwan, South Korea) to fund China allocations, which are very underweight,” KraneShares wrote.
The firm reported that all mainland sectors and subsectors closed the day positive, with volumes 326% above the one-year average. Of 5,092 stocks, only four fell.
The rebound continues to prove beneficial for ETFs with exposure to both mainland and Hong Kong stocks.
Since Sept. 23, the KraneShares CSI China Internet ETF (KWEB) is up 24.94% on a total return basis. Meanwhile, the KraneShares Bosera MSCI China A 50 Connect Index ETF (KBA) is up 21.74% over the same period.
See also: A History of KBA and KraneShares With Brendan Ahern
KWEB seeks to track the CSI Overseas China Internet Index. The Index includes publicly traded companies outside of mainland China that operate within China’s internet and internet-related sectors. The fund provides exposure to the country’s internet equivalents of Google, Facebook, Amazon, and eBay. The companies may be listed either in Hong Kong or the U.S. The fund carries an expense ratio of 0.70%.
KBA invests in China-A shares within mainland China across multiple sectors — specifically those from the MSCI China A 50 Connect Index, and transacts in the renminbi. This fund seeks to capture 50 large-cap companies that have the most liquidity and are listed on the Stock Connect.
It also offers risk management through the futures contracts for eligible A shares listed on the Stock Connect. The index uses a balanced sector weight methodology to give exposure to the breadth of the country’s economy. KBA has a management fee of 0.56% with contractual fee waivers that end 8/01/25.
For more news, information, and analysis, visit the China Insights Channel.