China Enters Bull Market, Outperforms In February: 5 Top ETFs

The Chinese stock market was on fire in February buoyed by optimism over trade deal with the United States. This is especially true as the nearly year-long trade spat between the world’s two largest economies seems to be coming to an end after President Donald Trump delayed his plan for raising tariff on $200 billion worth of Chinese goods from 10% to 25%, indicating chances of a fruitful trade deal (read: 10 ETF Areas to Gain as Trump Delays Additional Tariffs).

Additionally, stimulus and a wide range of reforms implemented by the government to revitalize its economic growth have raised the appeal for these stocks. China’s central bank cut its reserve requirement ratio (RRR) for the fifth time early this year and offered financial institutions $83 billion in liquidity as part of a wider economic stimulus. The bank has signaled more stimulus measures in the near term. The lifting of some trading curbs and deeper reforms in the finance sector have added to the enthusiasm. Moreover, depressed valuations have also encouraged investors to charge up at lower levels.

Adding to the fervor is MSCI’s move to quadruple the weighting of Chinese big caps (A-shares) from the current 5% to 20% for a number of its indexes, most notably the MSCI Emerging Markets Index in three phases — 10% in May, 15% in August, and further to 20% in November. The global index provider will also add 168 new mid caps in November and 27 stocks from the Shenzhen Stock Exchange's ChiNext.

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