What Coronavirus? These China ETFs Gained Past Month

Being the epicenter of the coronavirus epidemic, China’s investing world is being closely monitored. Economists around the world are busy projecting economic losses from the virus attack.

OECD’s annual GDP growth projection for China is just 4.9% this year, suggesting a 0.8-point decline from the OECD's original growth forecasts announced last November. City lockdowns, factory shutdowns and travel restrictions have led to output contraction in China.

Still, many China ETFs stood up to the coronavirus scare in the past month. Apart from compelling valuations, policy easing is also helping the space. The government and central banks of China have left no stone unturned to fight the outbreak.

The People's Bank of China (“PBOC”) lowered the interest rate on its medium-term lending on Feb 17. In order to infuse liquidity into the financial system, China's central bank injected 100 billion yuan (or around US$14.33 billion) into the market in mid-February.

China's securities commission announced some changes to the refinancing rules for listed companies, mainly to enhance liquidity largely for small- and medium-cap stocks (read: Can China ETFs Gain on New Stimulus to Combat Covid-19?).

The PBOC in fact opted for policy easing at the start of this year and injected about $115 billion into the country’s financial system by slashing RRR for commercial lenders across the board by 50 basis points.

Apart from these measures, signing of the phase-one trade deal benefited China ETFs. Investors should note that after struggling for almost two years, the United States and China struck a preliminary trade deal on Jan 13.

Major index providers are raising the weights of China A-shares in their global benchmarks, which probably led to inflows of billions of dollars into those stocks. Global index compiler MSCI Inc. increased the weights of China A shares in certain indexes by hiking the inclusion factor to 20% from 15% last November. MSCI added China A shares to its widely-tracked indexes for the first time in June 2018, while other index providers like FTSE Russell and S&P followed suit.

Against this backdrop, we highlight a few China ETFs that have actually gained in the past month.

ETFs in Focus

Xtrackers Harvest CSI 500 China-A Shares Small Cap Fund ASHS — Up 17.7%

The underlying CSI 500 Index aims to track 500 small cap companies listed on the Shanghai and Shenzhen stock exchanges. The 502-stock fund charges 65 bps in fees (read: Top ETF Stories of Virus-Infected February).

iShares MSCI China A ETF CNYA — Up 14.4%

The underlying MSCI China A International Index composes of domestic Chinese equities that trade on the Shanghai or Shenzhen Stock Exchange. The fund charges 65 bps in fees.

KraneShares Bosera MSCI China A Share ETF KBA — Up 14.6%

The underlying MSCI China A Inclusion Index is designed to track the progressive partial inclusion of A Shares in the MSCI Emerging Markets Index over time. The fund charges 60 bps in fees.

Xtrackers Harvest CSI 300 China A-Shares Fund ASHR — Up 13.2%

The underlying CSI 300 Index is designed to reflect the price performance of the China A-share market and is composed of the 300 largest and most liquid stocks in the China A-share market. The 302-stock fund charges 65 bps in fees.

Invesco China Technology ETF CQQQ — Up 5.4%

The underlying FTSE China Incl A 25% Technology Capped Index measures and monitors the performance of publicly-issued common equity securities of companies that are open to foreign ownership and derive a majority of their revenues from the information technology sector in China, Hong Kong and Macau. The fund charges 70 bps in fees.

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