With China Stocks Rebounding, Call on KALL | ETF Trends

China stocks are rebounding, and plenty of well-known global banks are suddenly waxing bullish on the once-moribund asset class.

Count the KraneShares MSCI All China Index ETF (KALL) as among the exchange traded funds benefiting from market participants’ new-found enthusiasm for China equities. KALL is higher by almost 10% over the past month. The KraneShares fund could be entering a new era of relevance because of its methodology.

KALL follows the MSCI China All Shares Index. That’s pertinent because that gauge includes stocks trading on mainland China as well as Hong Kong and New York. For investors, the ETF’s deep bench approach could be appealing at a time when China bulls are divided on exactly what corners of the country’s equity market they’re constructive on. Some are bullish on A shares (mainland stocks), while others like Hong Kong names, etc.

Time to Be Constructive on KALL?

Aside from the fund’s surge over the past month, there could be other reasons to consider KALL. Those include data indicating some global investors, including hedge funds, have recently pared positions in Japanese and U.S. stocks – two of the best-performing groups this year – and directed proceeds to Chinese equities. Other data indicates there’s increasing appetite for A shares.

“Goldman Sachs said changes are afoot in China that point to a potentially stronger risk appetite and a more conducive trading environment for A shares in the near term, after China’s State Council, or cabinet, issued a nine-point guideline last month to prop up the US$9 trillion stock market,” reported the South China Morning Post.

In what could also be a catalyst for KALL, the Post also noted that UBS recently turned constructive on Chinese stocks. Last month, the Swiss bank upgraded its rating on Hong Kong-listed stocks and the aforementioned MSCI China Index to “overweight.” French bank BNP Paribas also believes the MSCI China Index could offer more near-term upside.

While Beijing is taking steps to support the economy and financial markets, investors likely need to see more encouraging economic data before getting overtly bullish on ETFs like KALL. It’s possible that scenario will materialize.

“Recent macro data from the world’s second-largest economy has indicated, albeit tentatively, that the trough of the economic downturn may now be in the rearview mirror. There is a growing sense that China can still hit the 5 per cent GDP growth target even though the economy has yet to begin firing on all cylinders,” according to the Post.

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