Assess ASHR as Optimism for Chinese Stocks Builds | ETF Trends

Chinese stocks are matriculating higher to start 2023, benefiting scores of US-listed exchange traded funds in the process.

Up 8.24% year-to-date, the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) is certainly part of that group. The $2.82 billion ASHR follows the the CSI 300 Index, and while its performance over a month-plus into 2023 is encouraging, some market observers believe more upside is on the way for stocks in the world’s second-largest economy.

That outlook is supported by the fact active fund managers in China are optimistic. Really optimistic. So much so that data suggests it’s been five years since active managers there have been this ebullient on their country’s equities.

“Active managers have never been this positive toward China markets in the past five years,” said Steven Shen, manager of quantitative strategies at EPFR, reported CNBC. “In the very short term we should be expecting more inflows from the active managers.”

Active fund managers’ enthusiasm for Chinese stocks is pertinent to investors considering ASHR, because as the ETF’s name implies, it’s dedicated to A-shares, which are the stocks trading on mainland China bourses. Signaling bullishness among those equities, Shanghai-listed stocks jumped 5% last month. Money is flowing in at the most rapid pace in a year.

“Back then, local investors had been more cautious. The highly transmissible omicron variant and China’s zero-Covid policy subsequently locked down the city of Shanghai for two months, while constraining business activity in much of the country. In 2022, GDP grew by 3%, one of the slowest paces in decades,” according to CNBC.

What could support more upside for ASHR as 2023 moves along is that, to this point in the year, local Chinese retail investors and U.S. institutional investors haven’t stepped back into Chinese stocks in significant fashion. Analysts believe it’s necessary for both sets of market participants to revisit Chinese equities to propel the asset class to more gains; should that happen, ASHR is one of the ETFs that could benefit.

Last month, American money managers bought just $1.3 billion worth of Chinese stocks and some remain underweight the asset class.

According to CNBC: “U.S.-based long-only managers shared that they just started to reduce their underweights on China, or were in discussion with investors to release mandate constraints on China exposure,” Morgan Stanley analysts said. “They expect inflows from asset owners to accelerate in 2Q23.”

ASHR is higher by almost 20% for the 90 days ending Feb. 4.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.