China country-specific exchange traded funds have stood out as the economy returns to growth, and the run may still have legs in the new year.
Year-to-date, the iShares MSCI China ETF (NASDAQ: MCHI), the largest China ETF by assets, increased 27.7%, and the Xtrackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR), the largest China A-shares related ETF, advanced 34.4%. Meanwhile, the broader iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG) was 18.0% higher.
China’s containment of the coronavirus and the return to economic growth has helped boost the value of Chinese stocks globally by about $5 trillion, the Wall Street Journal reports.
More recently, the European Union and China agreed on terms of an investment accord, which helped the benchmark CSI 300 Index rise 1.9% Thursday, to hit its highest level since June 2015.
Looking ahead, market observers anticipate China will continue to benefit from the depressed global interest rates and the copious amounts of liquidity around the world’s financial system, along with the country’s rapid post-pandemic rebound.
In October, the International Monetary Fund projected Chinese GDP will advance 8.2% in 2021, following an estimated 1.9% rise for 2020.
Magnus Andersson, regional co-head of equity capital markets at Morgan Stanley, argued that international investors are “starved for growth” and want to buy into good Chinese companies that are expanding. “There’s a long queue of very high-quality companies with real growth and exciting stories lining up to come to the market,” he told the WSJ.
Aaron Arth, head of the financing group in Asia ex-Japan at Goldman Sachs, believes Chinese technology, health-care, and consumer companies will be some of the most important equity plays. “2021 is shaping up to be as busy, if not a busier year, than 2020,” he told the WSJ.
Kevin Anderson, head of investments for Asia Pacific at State Street Global Advisors, highlighted the fact that many Chinese companies merit greater attention, regardless of political tensions or sanctions limiting investments in some firms. “We’re focused on China because of its resiliency and the potential for earnings to be delivered,” he told the WSJ.
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