Chart: China Sectors Show Wide Dispersion In 2019

In 2018, market turbulence, escalated trade tensions, and fears of a global slowdown caused China’s equity markets to struggle. In 2019 however, China has reversed course, with each of its 11 GICS sectors in positive territory and Chinese sectors up 13.4% YTD on average, outperforming the MSCI Emerging Markets Index, which returned 8.91% YTD.1Strength from China has largely come from improved EM sentiment, the Fed pausing its rate hikes, muted fears around a global slowdown, aggressive stimulus by the Chinese government, and positive developments in the ongoing US-China trade negotiations.

Yet as we discussed in our recent post, Embracing China’s Growth with a Sector Based Approach, China’s sectors do not all move together. In the chart below, we show the performance of Global X ETFs that are designed to track China’s 11 GICS sectors relative to CHIL, a large cap ETF tracking the 50 largest stocks in China, which is up 13.38% YTD.

China Sectors vs. Global X MSCI China Large-Cap 50

Performance shown is past performance, based on the NAVs of the underlying sector ETFs and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more of less than their original cost and current performance may be lower or higher than the performance quoted.  To view standard performance each of the funds, please click on links available under “Related ETFs” below this post.

As demonstrated in the chart above, the difference in returns between the best and worst performing sector ETFs in China is 19.10% just two months into the year. For context, the difference between the best and worst performing sectors in the US so far this year is only 10.30%.2 The ETF tracking China’s Information Technology sector has led with returns 26.80%, while Utilities have lagged at 7.70%.

Such wide sector dispersion has been driven by two key catalysts: US-China Trade Negotiations and China’s stimulus efforts.

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