Improved Growth Forecast Sets the Stage for China ETFs

Increased growth prospects for China’s economy courtesy of the International Monetary Fund should set the stage for more investor interest in ETFs focusing on the country.

China’s growth has been stunted by ongoing real estate development issues. But the government’s willingness to step in and inject stimulus measures into the economy could be bearing fruit, at least in the IMF’s eyes. That opens the door for China-focused ETFs to experience upside. But there’s still more work to be done.

“Some progress is being made, but a lot more is needed,” said IMF’s First Deputy Managing Director Gita Gopinath via a CNBC report. The report noted that the IMF raised its 2023 forecast to 5.4%, but more government assistance is necessary to alleviate the country’s real estate woes.

“There remains a lot of stress in the market. There remains weakness in the market,” she added. “This is not going to be over with quickly. It’s going to take some more time to transition back to a more sustainable size.”

Future Upside for China ETFs

Bullish investors looking to play future upside for China ETFs have a few options to contemplate. For broad-based exposure, one option is the KraneShares MSCI All China Index ETF (KALL). The fund follows the MSCI China All Shares Index. This index serves as a benchmark of companies based and headquartered in the country as well as listed on the mainland, Hong Kong, and the U.S.

For exposure to large-cap companies that offer A-shares, consider the KraneShares Bosera MSCI China A Share ETF (KBA). It offers foreign investors access to the mainland markets. The fund invests in Chinese A shares across multiple sectors, specifically those from the MSCI China A 50 Connect Index.

KBA seeks to capture 50 large-cap companies that have the most liquidity and are listed on the Stock Connect. It 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 Chinese economy.

For an emphasis on technology and its growth prospects, investors can consider the KraneShares Hang Seng TECH Index ETF (KTEC). The fund offers exposure to Hong Kong internet stocks, e-commerce companies, fintech firms, and other tech-related companies.

KTEC aims to track the aforementioned Hang Seng TECH Index. The index includes the 30 technology companies in Hong Kong’s burgeoning tech sector with the highest free-float market capitalization.

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