Amid swirling, negative feedback loops about China, new data has dropped that restates the case for investing in the key economy. Retail sales rose 5.5% compared to 5.2% previously forecast, while industrial production rose 7% compared to 5%. Resilience in China’s economy underscores the still appealing long-term case for investing in a China ETF like KraneShares Bosera MSCI China A 50 Connect Index ETF (KBA), for example.
See more: 3 Thematic China ETFs for An Uncertain Outlook
KBA tracks the MSCI China A Index for a 55 basis point fee. The strategy, which just celebrated its 10th anniversary this month, could offer a strong route into China investing. It excludes small-caps, which may suffer more from ongoing real estate contagion, emphasizing large and midcap equities instead.
It includes two of the largest stocks from each GICS sector. Further, it adds others by market cap until total security count hits 50. The strategy weights its holdings based on market cap weights from its parent index, with sector weights set to mirror that parent as well.
That approach has helped the China ETF perform very well. It has returned 6.8% over the last three months, per VettaFi data. That return has helped it outperform both its ETF Database Category and FactSet Segment averages.
What, then, might the strategy’s outlook be for the rest of 2024? China’s outlook still looks uncertain, of course. The recent defiance of expectations by economic data suggests a China allocation can still deliver for portfolios.
Not only does having a China allocation offer diversification, it also can deliver returns outside of the U.S.’ soft landing story. That can help notably over the long term. KBA, a leading China ETF, may be able to deliver as a linchpin for that allocation.
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