Exchange-traded funds targeting Chinese stocks rose on Tuesday, as Beijing was reported to be considering a support package for the struggling stock market.
Shares of the iShares MSCI China ETF MCHI were up 3.1% in late morning trading Tuesday, while the KraneShares CSI China Internet ETF KWEB was up 3.9%, according to FactSet data, at last check. ETFs, which each have about $5 billion in assets under management, have taken a hit so far in 2024 after posting losses in each of the past three years.
Chinese authorities are considering measures to rescue the struggling stock market, which could include offshore Stabilization Fund funds, according to a Bloomberg News report citing people familiar with the matter. Stocks in China fell amid concerns about the country's real estate problems, demographic challenges, disappointing growth and potential regulatory activity.
The Financial Action Conference in Beijing recently raised investor concerns about a potential regulatory “crackdown” on China's financial sector, Marko Babic, chief strategist at Clocktower Group, told MarketWatch in a phone interview last week.
be seen: China-focused ETFs are struggling amid fears of another “regulatory crackdown.”
At the same time, investors were digesting disappointing economic data coming out of China.
“China's GDP grew 5.2% in the fourth quarter, below market expectations of 5.3%,” a Clock Tower note dated January 17 says, while retail sales growth in December was 7.4%, i.e. Lower than the consensus estimate of 8%.
The clock tower also pointed to China's real estate problems and growing concerns about demographics.
“The ongoing decline in real estate values shows no signs of abating,” the company note says. “In addition, the number of newborns reached a new low in 2023, raising concern about China’s long-term demographic crisis.”
Shares of other ETFs that invest in Chinese stocks have remained in the red so far this year.
For example, even after jumping on Tuesday, shares of the Invesco China Technology ETF CQQQ remained down 13% this month, according to FactSet data, at last check. Shares of the Xtrackers Harvest CSI 300 China A-Shares ETF ASHR are down about 6% year to date, despite rising in Tuesday morning trading.
Meanwhile, the KraneShares CSI China Internet ETF is down roughly 11% so far this year, while the iShares MSCI China ETF and iShares China Large-Cap ETF FXI are both down more than 8% year to date based on morning trading levels. Tuesday. .
