The People’s Bank of China (PBOC) has cut a key interest rate in a move aimed at boosting the overall economy. The cut to the 5-year Loan Prime Rate (LPR) was the largest on record for the LPR, as the bank looks set to boost the ailing property market. That move follows several other plans announced by state banks to provide billions in loans for developers.
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Despite several long-term advantages for China’s economy in its surging middle class and significant role in global electric vehicle markets, property markets have depressed consumer confidence. Should Chinese consumers be able to refinance thanks to rate cuts, that could be a helpful boost to confidence. An improvement to confidence could release significant cash consumers have been holding since the nation’s “Zero COVID” era.
An ETF for China Rate Cuts
So, if potential rate cuts in the U.S. that have failed to materialize have already boosted the U.S. economic outlook, consider the benefit of actual rate cuts in China. A firm like KraneShares provides a suite of ETFs offering a variety of types of exposure to the country’s economy.
For example, a strategy like the KraneShares CSI China Internet ETF (KWEB) remains a must-watch ETF if rate cuts boost the outlook in China. KWEB tracks the CSI Overseas China Internet index. The strategy charges a 69 basis point (bps) fee to invest in Chinese software and info tech stocks. Having turned ten last year, KWEB has seen its returns pick up over the last week per VettaFi data. It has returned 4.5% over the last week.
It’s clear that China investing has faced some challenges lately. However, the government’s efforts to address those economy problems could help bridge the gap for investors who still believe in the long-term prospects of a China allocation.
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