The real estate development crisis in China may be coming to a close, which could help prop up thematic exchange traded funds (ETFs) focused on Chinese real estate in particular. This could also help offset rising interest rates around the globe as central banks look to tame inflation.
According to a Global Times article, the “value of the top 50 Chinese real estate developers’ land purchases surged 130.2 percent month-on-month in September. Industry experts said on Sunday that the housing market has shown signs of bouncing back from the bottom, thanks to the stable recovery of the economy and effective government policies to ensure the sound development of the property sector.”
“In September, 10 cities including Beijing, Shanghai, Shenzhen in South China’s Guangdong Province and Hangzhou in East China’s Zhejiang Province released the third batch of land for development, domestic news site thepaper.com reported,” the article added.
China’s real estate market may have reached a bottom or be close to doing so, opening opportunities for investors to snatch up Chinese real estate at bargain prices. With more supply, it certainly makes for a buyer’s market, allowing them to obtain real estate at value-oriented offers.
“The improvement in real estate companies’ bidding for land comes amid market expectations that China’s property market is bouncing back from the bottom,” Song Ding, a research fellow at the Shenzhen-based China Development Institute.
An ETF to Play the Rebound
ETF investors looking to play a rebound in China’s real estate market can obtain exposure using the Global X MSCI China Real Estate ETF (CHIR). CHIR seeks to provide investment results that generally correspond to the price and yield performance, before fees and expenses, of the MSCI China Real Estate 10/50 Index.
The underlying index tracks the performance of companies in the MSCI China Index (the “parent index”) classified in the real estate sector, as defined by the index provider. Summarily, ETF investors get the following:
- Targeted exposure: CHIR is a targeted play on the real estate sector in China — the world’s second-largest economy by GDP.
- ETF efficiency: In a single trade, CHIR delivers access to dozens of real estate companies within the MSCI China Index, providing investors an efficient vehicle to express a sector view on China.
- All share exposure: The index incorporates all eligible securities as per MSCI’s Global Investable Market Index Methodology, including China A, B, and H shares, red chips, P chips, and foreign listings, among others.
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