Global markets have retreated on escalating fears of a coronavirus pandemic, but China country-specific exchange traded funds have staged a remarkable comeback and held up even as markets continued to sell-off.
Among the better performing non-leveraged ETFs of Wednesday, the Xtrackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR) rose 0.2%. ASHR also advanced over 12% since its late-January lows. Meanwhile, U.S. markets were on pace to experience their worst week since the financial crisis.
The sudden surge in Chinese markets seem to not reflect economic expectations. China’s economy is anticipated to take a blow from the coronavirus epidemic after Beijing enacted strict shutdowns and quarantine measures to contain the spread of the virus.
“It is unclear how much of the lost output will be recouped, but with many factories now closed and some workers laid off, we expect there to be only partial catch-up at best,” Jennifer McKeown, head of the global economics service at the firm, said in a research note, according to the Wall Street Journal.
Some market observers may believe that the sell-off would only be a temporary pullback and not the start of a protracted economic downturn. Consequently, health officials will be able to contain the virus, and economies will gradually recover.
Perhaps “stocks are suggesting this event is not signaling a recovery-ending collapse but rather simply a correction that is lowering valuations, checking investor sentiment, reducing the excessive leadership and popularity of the technology sector, and maintaining full-out policy support which could ultimately extend this bull market,” Jim Paulsen, chief investment strategist for the Leuthold Group, said.
More believe that bargain hunters may be getting in at cheap prices. For instance, UBS Global Wealth Management advised high net-worth clients to use this as an opportunity to increase exposure to China.
“We think investors should be buying the dip in emerging-market stocks and specifically Chinese stocks,” Maximilian Kunkel, chief investment officer for Germany at the Swiss wealth management firm, told Bloomberg. “You have a more attractive valuation and growth mix here and also China seems to be containing the virus and getting back to business.”
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