With the books closing on the first quarter of 2019, it’s been a strong start for U.S. equities–the Dow Jones Industrial is up 12.56 percent through Monday’s close, the S&P 500 is up 14.37 percent and the Nasdaq Composite is 18 percent higher. This is obviously translating into strength for exchanged-traded funds (ETFs), which garnered almost $50 billion in inflows year-to-date.
The rise comes after a rocky end to 2018, and investors are picking themselves up again in 2019. What sectors exactly have seen the hottest ETFs thus far in 2019?
A recurring theme is strength in China. China is becoming less resistant to safeguarding its businesses, which has opened up pathways to more foreign investment.
In addition, China ETFs have been the beneficiaries of index provider MSCI Inc. announcing recently that it would quadruple its weighting of large-cap Chinese shares in its benchmark indexes. A recent MSCI Inc. press release said the index provider would increase the weight of China A shares by upping the inclusion factor from 5 percent to 20 percent.
Here were the hottest ETFs during the first quarter.
1. ETFMG Alternative Harvest ETF (NYSEArca: MJ)— 46.30% YTD
Before the volatility-laden fourth quarter in 2018 tamped down gains, cannabis-related equities were flying high. However, they’re regaining their momentum in 2019 again as evidenced by MJ’s strong start.
MJ seeks to provide investment results that correspond generally to the total return performance of the Prime Alternative Harvest Index. The index is concentrated in the pharmaceuticals and tobacco industries and tracks the performance of the exchange-listed common stock of companies across the globe.
Earlier this year, MJ crossed the $1 billion mark in assets in addition to the Canada-based Horizons Marijuana Life Sciences Index ETF (HMMJ). This is not the first time HMMJ crossed that milestone, last achieving the feat back in October when Canada legalized marijuana.
2. ARK Genomic Revolution Multi-Sector Fund (NYSEArca: ARKG)— 37.11% YTD
Robotics and artificial intelligence (AI) are typically associated with disruptive technology and before long, this technology could represent standard fare in all industries. Genomics, the study of genomes, is also taking its own revolutionary steps as a disruptor, particularly in the health care industry.
For investors who missed out on the serendipitous run of FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks, they can look to capitalize on disruptive tech options in 2019 like genomics. The actively-managed ARKG seeks long-term growth of capital by investing in domestic and foreign equity securities of companies across multiple sectors, including healthcare, information technology, materials, energy and consumer discretionary, that are relevant to the fund’s investment theme of the genomics revolution.
3. Xtrackers Harvest CSI 300 China A ETF (NYSEArca: ASHR)— 31.01% YTD
ASHR seeks investment results that track the CSI 300 Index that is designed to reflect the price fluctuation and performance of the China A-Share market. In essence, it’s composed of the 300 largest and most liquid stocks in the China A-Share market, including small-cap, mid-cap, and large-cap stocks.
Without a majority of its holdings in state-owned enterprises compared to FXI, ASHR provides a more diversified representation of gaining access to the world’s second largest economy.
“There are a lot of companies on mainland China that just recently, because Chinese laws have loosened up, that have allowed investors outside of the U.S. to invest in Chinese stocks,” said ETF Trends CEO Tom Lydon.
As such, ASHR is a way for investors to gain exposure to China’s biggest, best and most authentic equities.
4. KraneShares Bosera MSCI China A ETF (NYSEArca: KBA)— 30.38% YTD
KBA seeks to provide investment results that correspond to the price and yield performance of the MSCI China A Inclusion Index. The index reflects the Chinese renminbi -denominated equity securities listed on the Shenzhen or Shanghai Stock Exchanges or A Shares included in the MSCI Emerging Markets Index, assuming that index’s methodology permitted the full inclusion of A Shares.
While ongoing trade negotiations between the U.S. and China have the capital markets eagerly anticipating a tangible trade deal, stimulus measures by the Chinese government to prop up the domestic economy are starting to take its effect. This certainly helped to fuel gains for KBA in the first quarter.
5. iShares MSCI China A ETF (BATS: CNYA)— 28.77% YTD
Activity in China’s manufacturing sector saw an uptick during the month of March, helping to ease fears of a global economic slowdown and boosted China ETFs like CYNA. Chinese factories showed a marked increase in activity, according to the official purchasing managers index–it rose to a six-month high of 50.5 during the month of March–up from 49.2 in February, which bested economists’ forecasts.
CYNA seeks to track the investment results of the MSCI China A Inclusion Index composed of domestic Chinese equities that trade on the Shanghai or Shenzhen Stock Exchange. The index is designed to measure the equity market performance in the People’s Republic of China, as represented by A Shares that are accessible through the Shanghai Connect or the Shenzhen-Hong Kong Stock Connect program.
For more market trends, visit ETF Trends.