Bet On China ETFs On A Solid Turnaround

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After being the world’s worst performer for much of this year, China’s stocks have staged a solid turnaround this month driven by a series of good news as Chinese President Xi Jinping cemented power for the third term. Hong Kong’s benchmark Hang Seng Index has gained 14% since last Friday, putting it squarely into the bull market territory, or more than 20% above its recent low. Golden Dragon Index has surged 23% so far in November, putting it on track for its best monthly return on record.

The impressive rally in the stock market has led to a solid jump in China ETFs as well over the past week. We have highlighted five funds that have outperformed the Hang Seng Index. These are KraneShares CSI China Internet ETF (KWEB - Free Report), Invesco Golden Dragon China ETF (PGJ - Free Report), KraneShares Hang Seng TECH Index ETF (KTEC - Free Report), MSCI China Communication Services ETF (CHIC - Free Report) and iShares China Large-Cap ETF (FXI - Free Report).

The dual tailwind of easing tensions between the United States and China as well as the easing of zero-COVID restrictions triggered a huge rally. Investors now see warmer ties between the world’s two largest economies after the G20 (Group of Twenty) summit, reducing delisting risks for hundreds of New York-listed Chinese firms and boosting the outlook for trade. Additionally, China’s supportive measures to its struggling housing market added to the strength.

Short covering also fueled a rally in the stocks. According to financial analytics firm S3 Partners, traders who bet against U.S.-listed China stocks rushed to buy back about $234 million this month through Nov 10, as the value of shares shorted surged by more than a combined $2.6 billion.

Given a sudden positive shift, most analysts like Goldman and BofA Strategists turned bullish on China stocks. Goldman expects both the MSCI China benchmark and the CSI 300 Index to rise by 16% in the next 12 months. Meanwhile, fund titans like Franklin Templeton Investments and Eastspring Investments are joining a growing list of money managers snapping up Chinese stocks on bets that Beijing’s shift from Covid Zero will bring significant gains.


ETFs to Bet On

KraneShares CSI China Internet ETF (KWEB) – Up 24.1%

KraneShares CSI China Internet ETF provides concentrated exposure to China-based companies whose primary business, or businesses are focused on Internet and Internet-related technology. KraneShares CSI China Internet ETF tracks the CSI China Overseas Internet Index and holds 44 securities in its basket, with a higher concentration on the top firms.

KraneShares CSI China Internet ETF has amassed $5.5 billion in its asset base and charges 69 bps in annual fees from investors. KWEB trades in an average daily volume of 22.5 million shares and currently has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook.

Invesco Golden Dragon China ETF (PGJ) – Up 18.9%

Invesco Golden Dragon China ETF follows the NASDAQ Golden Dragon China Index, which offers exposure to the U.S. exchange-listed companies that are headquartered or incorporated in the People’s Republic of China. It holds a basket of 68 stocks with a higher concentration on the top firms. Consumer discretionary and communication services sectors take the largest share at 55% and 21.6%, respectively.

Invesco Golden Dragon China ETF has AUM of $234.7 million and charges 70 bps in annual fees. It trades in an average daily volume of 113,000 shares and has a Zacks ETF Rank #5.

KraneShares Hang Seng TECH Index ETF (KTEC) – Up 18.1%

KraneShares Hang Seng TECH Index ETF offers exposure to the 30 largest companies in Hong Kong's rapidly growing technology sector. It tracks the Hang Seng TECH Index, which measures the performance of innovative companies with strong research & development investment, high revenue growth, and themes such as cloud, e-commerce, fintech and Internet.

KraneShares Hang Seng TECH Index ETF charges 68 bps in annual fees and has accumulated $6.6 million shares in its asset base. It trades in an average daily volume of 21,000 shares and has a Zacks ETF Rank #5.

MSCI China Communication Services ETF (CHIC) – Up 16.6%

MSCI China Communication Services ETF targets the communication services sector in China and follows the MSCI China Communication Services 10/50 Index. It holds 27 stocks in its basket with some concentration on the top firms.  

MSCI China Communication Services ETF has accumulated $6.4 million in its asset base and charges 65 bps in annual fees. It trades in an average daily volume of 1,000 shares and has a Zacks ETF Rank #5.

iShares China Large-Cap ETF (FXI) – Up 14.6%

iShares China Large-Cap ETF offers exposure to large companies in China by tracking the FTSE China 50 Index. It holds 50 stocks in its basket with a slight tilt toward the top three firms. iShares China Large-Cap ETF has key holdings in the consumer discretionary sector with 32.5% share, while financials (27.2%) and communication (18.3%) round off the next two spots.

iShares China Large-Cap ETF has AUM of $4.7 billion and an expense ratio of 0.74%. It trades in an average daily volume of 39.2 million shares and has a Zacks ETF Rank #5 with a Medium risk outlook.


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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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