Forget a 'V-Shaped' Recovery: The China ETF with 'Check Mark' Performance

China has come a long way since being the epicenter of the coronavirus from late 2019 to early 2020. With a China-friendly Joe Biden administration imminent and a vaccine on the way, more V-shaped recovery action could be on the way, which should help ETFs like the Xtrackers MSCI All China Equity ETF (CN).

CN seeks investment results that correspond to the performance, before fees and expenses, of the MSCI China All Shares Index. The fund will normally invest at least 80% of its total assets in securities of issuers that comprise either directly or indirectly the underlying index or securities with economic characteristics similar to those included in the underlying index.

The underlying index is designed to capture large- and mid-capitalization representation across all China securities listed in Hong Kong, Shanghai, and Shenzhen. CN’s expense ratio comes in at 0.50%. This may raise some eyebrows for the cost-conscious, but its performance speaks for itself.

After hitting $28.77 back on March 18 when the pandemic sell-offs were at its peak, the fund has surged 53%. While all the talk is all about a V-shaped recovery in the broad market, CN is making a better ‘check mark’ recovery.

CN Chart

China Recuperating Nicely

More gains could be on the way as China continues on its path to recovery. The second largest economy is also looking to become more self-reliant with an ambitious five-year economic plan.

“Officials reported that the economy expanded by 4.9% in the third quarter compared with a year earlier, just shy of its pre-pandemic pace,” an Economist article noted. “Whereas most other countries are mired in recession and grappling with a new wave of covid-19 cases, China has just about completed the upward leg of a V-shaped rebound. Analytically, its success is easy to explain.”

“China got one crucial thing right: by almost stamping out the virus, it was able to allow activity to resume with few restrictions,” the article added. “Schools are fully open, factories are humming and restaurants are buzzing. Moreover, China is lucky in one crucial way: it is better insulated from weak global demand than smaller peers such as New Zealand that have also done a good job of containing the pandemic. Until vaccines are rolled out, others will struggle to match China’s feat.”

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