Don't Let Latest Numbers Fool You: China's Retail Still a Bright Spot

The latest data coming out of China show an uneven recovery, but the retail industry still remains a bright spot, aiding funds like the KraneShares MSCI All China Consumer Discretionary Index ETF (KBUY).

Per a South China Morning Post article: “Julian Evans-Pritchard, senior China economist at Capital Economics, said that on a month-on-month basis, domestic consumer spending, which has long been criticised for lagging behind the curve, picked up last month due to the extended Labour Day holiday and a tighter labour market.”

“We think there is still scope for strong rises in consumption as the virus situation comes under control and the vaccination roll-out broadens,” Evans-Pritchard said. “Investment and exports are set to cool over the coming months. Consumption [is]a bright spot as momentum elsewhere falters.”

Per the fund description, KBUY seeks to provide investment results that, before fees and expenses, track the price and yield performance of a specific foreign equity securities index. The fund’s current index is the MSCI China All Shares Consumer Discretionary Index.

Under normal circumstances, the fund will invest at least 80% of its total assets in components of the underlying index, depositary receipts. The underlying index is a free float adjusted market capitalization weighted index designed to track the equity market performance of Chinese companies engaged in the consumer discretionary sector.

Highlights of the fund per the KraneShares website:

  • Access to some of China’s leading consumer facing brands that may benefit from new domestic spending patterns.
  • Strong growth potential from increased consumption among China’s expanding urban middle class.
  • Exposure to Chinese companies listed in Mainland China, Hong Kong, and the United States.

KBUY Chart

A Return to Normalcy?

After its economy was in the eye of the storm of the pandemic, it appears China is well on its way to righting the ship. Ding Shuang, chief Greater China economist at Standard Chartered Bank, believes China’s economic recovery is heading toward a more even recovery across all sectors.

“The recovery has continued to return to the potential output level,” he said. “In terms of the average two-year growth rate, the second quarter was likely to improve from the first quarter to slightly above 5 per cent.”

Despite Latest Numbers, China's Retail Still a Bright Spot 1

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