Industry Updates

DWS’s China CSI 300 ETF pulls in $500m inflows following rebalance

“Most significant index balancing by far,” Goldman Sachs said

Theo Andrew


DWS’s China CSI 300 has pulled in over $500m in the two months following a rebalancing of the market's main benchmark of onshore-listed companies.

The Xtrackers CSI300 Swap UCITS ETF (XCHA) has recorded inflows of $532m since 11 December last year, according to data from ETFLogic, the day after the rebalancing which Goldman Sachs labelled “the most significant index balancing by far”.

It comes after a challenging year for the market which has been hampered by concerns over its debt-laden property sector and a regulatory crackdown of its tech sector.

However, a Goldman Sachs note said the index has become “more thematically compelling” to ETF investors with 20 of the 28 new additions belonging to China’s “Common Prosperity” universe, favourably exposed to strategic policy tailwinds.

Industrials and materials were the biggest gainers, rising by 2% and 1%, respectively, while the financial and consumer sectors lost ground.

The investment bank added the rebalance is slightly more growth-orientated, but also more expensive, with the index’s forward price to earnings ratio rising by 1 point to 13.9x.

Despite this, Phillip Wool, managing director of Rayliant, whose flagship active ETF product, the Rayliant Quantamental China Equity ETF (RAYC) is benchmarked to the index, said valuations are compelling.

“Earnings are growing much faster than what we see in developed markets, or the rest of emerging markets for that matter, but if you compare valuations, A-Shares look quite cheap,” he said.

“Onshore stocks compare favorably to US stocks – even after a selloff in US shares – with the S&P 500 at nearly 20x and the NASDAQ at almost 28x.”

XCHA currently houses $2.4bn in assets under management (AUM) and has amassed over a third of assets ($880m) in the past six months, according to data from ETFLogic.

However, the ETF has been hit by the headwinds that have faced China over the past year, returning -13.87% over the past years, as at 10 February.

Toby Dudley-Smith, head of passive sales at DWS, said: “This year proved challenging for China following COVID-19 outbreaks, power outages, supply bottlenecks, fiscal tightening and regulatory overhaul of a number of sectors.

“This year we have seen strong inflows into XCHA, driven by the attractive swap enhancement, and growing feeling amongst investors that the worst could be over, with many of the aforementioned drags on growth likely to abate in 2022.”

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