Industry Updates

Chinese equity ETFs dominate Q1

George Geddes

a large landscape with a winding road

We are now officially in to Q2 2019 after what has been a rallying performance in the first three months of the year as the equity market rebounded from a turbulent end to 2018.

One region which has shown a significantly strong performance for the year-to-date is the Chinese equity market, in particular, A-shares and CSI 300 ETFs. The Xtrackers CSI300 Swap UCITS ETF (XCHA) and the Lyxor Hwabao WP MSCI China A DR UCITS ETF (CNAL) have both offered attractive returns this year with 35.33% and 29.82%, respectively, according to data from Bloomberg.

The CSI 300 is an index comprised of the top 300 stocks traded in the Shanghai and Shenzhen stock exchanges. A-shares are shares for Chinese based companies which are traded on the Shanghai and Shenzhen stock exchanges.

Catalysts for the Chinese equities rise in value include the potential conclusion of the trade war between the US and China as well as the country’s announcement of additional infrastructure spending.

Additionally, the technology sector sparked back to life as the ETFs’ largest holdings such as Microsoft and Apple start the year strong. The iShares S&P 500 Information Technology Sector ETF (IITU) has a YTD return of 17.96%.

As a result of the global equity markets increasing in value, the commodity market has seen a slide. Despite palladium and rhodium ETFs producing triple digit returns since 2017, a number of ETCs have produced minimal returns so far this year or even losses over Q1. The Xtrackers Physical Rhodium ETC (XRH0) has produced YTD returns of 29.86% but has been impacted in the last week as it faced a loss of 6.25%.

Silver and Gold ETCs produced some of the biggest losses for Q1, as the iShares Physical Silver ETC (SSLN) and the ETFS Physical Gold (PHGP) have faced losses of 3.86% and 1.93% for Q1, respectively.

Furthermore, the Turkish equity market has also fallen as a result of the nation’s government encouraged the country’s banks to withhold lira liquidity from the offshore swap market. This was the government’s bid to prevent the value of the lira falling. Consequentially, the iShares MSCI Turkey UCITS ETF (ITKY) saw losses of 10.94% for the month of March.


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