Following three consecutive years of losses, China stocks were believed to present investors with upside potential for 2024. To start the year, that thesis is being challenged. That’s because the MSCI China Index is lower by nearly 5%. But some professional investors believe China equities will rebound as this year matures.
That could imply opportunity is still available with exchange traded funds such as the KraneShares MSCI All China Index ETF (KALL). The ETF could be an attractive choice for investors seeking exposure to various iterations of China stocks. And that’s because the fund’s reach isn’t confined to just A-shares or Hong Kong-listed names. That trait could prove relevant at a time when some high-level market participants are bullish on Chinese stocks. Although some aren’t extoling preferences for specific share classes.
The timing of that view could be appropriate. That’s because, across the board, China stocks are viewed as arguably too expensive to ignore. Plus, after the aforementioned three-year losing streak, China’s weight in some international equity benchmarks has declined. That has forced some global fund managers to become under-allocated to Chinese stocks.
China ETF KALL Has Fuel for Strong 2024
Patience will likely be required by China equity bulls and investors embracing funds such as KALL. But a case can be made that that patience will be rewarded and that the current environment as it pertains to China stocks is conducive to passive strategies such as KALL.
Consider the findings at a recent UBS Wealth Management 2024 outlook event. The asset manager polled chief investment officers in attendance, finding 30% are bullish on China for 2024. Tan Min Lan, Asia Pacific head of UBS Chief Investment Office, told CityWire Asia she found that percentage to be surprising.
“She recommends a 6% allocation to Chinese equity in a multi-asset global portfolio. ‘For investors with limited exposure, China is a cheap optionality,’ said Tan,” according to the publication. “Despite challenges, she anticipated sustained policy support ensuring China’s full-year growth in the mid-4% range.”
Should Beijing prove successful in engineering its own soft landing and if China’s central bank provides accommodative monetary support, China stocks, including KALL member firms, could find the assistance needed to finally deliver for investors.
A recent Bloomberg survey noted foreign investors may finally be willing to revisit China stocks, which would be a catalyst for KALL.
“One potential tailwind cited by most of the survey respondents is a likely end to foreign avoidance of Chinese equities. After 2023 witnessed the smallest inflow since the stock connect program with Hong Kong started in 2016, lower global interest rates and improving risk-reward are seen luring foreign investors back to A-shares,” according to the outlet.
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