Industry Updates

China ETFs continue to post strong 2019 performance

Tom Eckett

Kabukichō, Tokyo street with many signs

China ETFs were among the best performing funds in the week ending 8 April after Beijing and Washington signalled progress in the ongoing trade negotiations.

According to data from Ultumus, the £57m Lyxor Hwabao WP MSCI China A (DR) UCITS ETF (CNNA) posted the strongest returns of the China ETFs, increasing 9.2% last week.

This was followed by the iShares Core CSI 300 Index ETF and the ComStage FTSE China A50 UCITS ETF, which both jumped 8.2%. Also among the best performers was the Mirae Asset Horizons CSI 300 ETF and the iShares FTSE A50 China Index ETF.

Chinese equities are continuing their strong performance from Q1, where they posted the best quarter since Q4 2014, after the CSI 300 index finished 29% up, better than any other country.

The performance this year has been driven by a number of factors including cooling trade war tensions. Last month, US Treasury secretary Steve Mnuchin said the two sides had “constructive talks” in Beijing, which led to Chinese regulators approving applications by JP Morgan and Nomura to establish brokerages.

Meanwhile, President Xi Jinping said last Friday a new consensus had been reached after Vice Premier Liu He travelled to Washington for another round of negotiations where he met with President Donald Trump.

While Trump said they would know within “the next four weeks” if there was going to be a breakthrough.

China on the up

Elsewhere, MSCI’s inclusion of A shares into its flagship benchmark has also been a driving factor. Last June, the first tranche of Shanghai-traded stocks entered the MSCI Emerging Market index, which tracks around $1.9trn in assets.

The index provider is set to quadruple its weighting of Chinese A shares to 20% later this year with 5% increases in May, August and November, potentially bringing in around $80bn in foreign inflows into Asia’s largest economy.

In a research note, JP Morgan strategist Marcella Chow, said: “We believe there is still potential upside to China’s stock market rally, as monetary conditions remain accommodative and the government is likely to be spending more to stimulate the economy.”

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