Written by Suzanne McGee
(Reuters) – Investors poured $5.2 billion in new assets into U.S.-based exchange-traded funds (ETFs) targeting the Chinese market last week while mainland China’s financial markets were closed for National Day. , some asset managers are hoping for an optimistic outlook. It will endure.
The inflows came after the Chinese government’s first stimulus package, which included interest rate cuts and changes to bank liquidity requirements, was announced in late September, with Chinese stocks on September 30th It was the biggest increase since 2008.
Tuesday is the first working day in China after a week of holidays, and officials from China’s top economic planning agency are expected to provide information on measures to implement policies to boost economic growth. There is.
Some are optimistic that this support will sustain and extend the dramatic turnaround in investor sentiment in the wake of China’s actions. The $5.2 billion in inflows for the week ending Oct. 4 compares with average weekly outflows of $83 million so far in 2024 and $27 million last year, according to Morningstar data. .
“The market is waiting for a credible commitment from China to get the economy back on track,” said Michael Reynolds, vice president of investment strategy at New York-based specialty asset management firm Glenmede Trust. . “Now we need to see the follow-through.”
The authorities also announced plans to expand investment in domestic ETFs. According to the Financial, in late September the China Securities Regulatory Commission announced that it would be pegging more capital to mainland China-based ETFs that track China’s “Star Market,” a section of the Shanghai Stock Exchange dedicated to high-tech companies. announced plans to quickly approve new ETFs that will be allocated to times.
“The Chinese market is oversold,” said Jonathan Crane, founder and CEO of CraneShares. His flagship ETF, CraneShares CSI China Internet, raised $1.39 billion in new assets in the last week alone, returning to positive year-to-date flows, according to Morningstar.
The $8.3 billion KraneShares ETF was just one of more than 20 China-focused funds to post double-digit returns in a week, with gains ranging from 10% to 28%, trading in U.S. markets over the past week. outperformed over 3,000 other ETFs. According to Paris-based data analytics company Truck Insight.
Klein believes the stock price surge is just the beginning. This is because investors have low exposure to Chinese stocks following the sharp drop in the benchmark CSI300 index in February. This in itself is a reaction to growing anxiety about everything from the real estate downturn to lackluster economic indicators to deflation. and geopolitical events.
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“This is just saying that a small part of the world needs to go back to China or rethink China,” Klein added. “This was just seed money.”
Most of the money over the past week has flowed into the largest ETFs that offer broad exposure to a wide range of Chinese large-cap stocks. BlackRock’s $7.99 billion iShares China Large-Cap ETF received $2.7 billion in inflows last week, according to Morningstar.
“When you see a move this large and violent, you see money flowing into these (index-tracking) products first,” said Michael Burrell, head of ETF capital markets at asset management firm Matthews Asia. Ta. Still, assets in the $44.8 million Matthews China Active ETF are soaring after last week’s net inflows of $11.7 million.
Jason Su, founder and CEO of asset management firm Rayliant Global Advisors, said the Chinese government needs detailed and influential information to ensure that China-focused ETFs continue to attract new assets. He said there was a need to announce a major reform package.
“The next bazooka from the Chinese government needs to come in the form of a formalized new stimulus plan and additional timelines,” he said.
Dave Mazza, CEO of Round Hill Investments, said the tide has turned in investor sentiment.
Last week, Roundhill launched the Roundhill China Dragons ETF, which focuses on nine companies that Roundhill considers to be the largest and most innovative Chinese technology companies. Mazza said there was $35 million in net inflows in the first two business days.
“We thought the tide would soon turn and China would become investable again,” Mazza said.
(Reporting by Suzanne McGee; Editing by Megan Davies and Leslie Adler)
